Several FTX clients have petitioned a bankruptcy judge in the United States to prohibit the defunct cryptocurrency exchange from applying 2022 prices to the valuation of their cryptocurrency deposits during repayments.
The Official Committee of Unsecured Creditors, in its endorsement of the debtor’s motion to estimate claims using digital assets, stated that collectively estimating claim values—as suggested in the motion—is the most effective approach to streamlining the process of claim reconciliation and accelerating the confirmation under Chapter 11.
As stated in the Debtors’ motion:
“If the court determines that cryptocurrency deposits are not property of the estate then such cryptocurrency (which has appreciated more than $5 billion since the petition date) must be returned to customers in kind and may not be used to pay, among other things, administrative claims.”
FTX intends to reimburse customers in U.S. dollars, per the bankruptcy plan, following the value of cryptocurrencies at the time of the company’s November 2022 bankruptcy filing.
Although FTX maintains that the valuation of claims must adhere to U.S. bankruptcy law as of that date, customers contend that this approach significantly undervalues cryptocurrencies, which have experienced substantial appreciation since their market low in 2022.
Creditor activist Sunil Kavuri expressed his disapproval of Moskowitz and Boies, the debtor’s attorneys, on X (formerly Twitter) about the debtor’s motion to estimate claims.
Cointelegraph reached out to Kavuri for clarification on whether the attorneys support reimbursing clients in kind with cryptocurrency. As property rights remain unresolved, Kavuri explained that the attorneys contend clients should receive “at least the value of crypto back.”
FTX clients worldwide, including the Official Committee of Unsecured Creditors, have submitted many analogous letters to the U.S. bankruptcy court before the deadline on Thursday to contest FTX’s valuation methodology. On January 25, FTX intends to present its list of cryptocurrency prices in Wilmington, Delaware, for approval at a court hearing.
Specific clientele asserts that the proposal exhibits inequity towards individuals or entities holding Bitcoin (BTC) and other volatile assets. They specifically mention external investors and stablecoin holders who obtained FTX bankruptcy claims at a reduced expense.
Since FTX’s bankruptcy declaration, the values of three significant cryptocurrencies held by FTX customers—Bitcoin, Ether (ETH), and Solana (SOL)—have increased substantially.
Additionally, FTX clients have opposed the firm’s valuation of its equity shares and token, FTT, at $0. The bankruptcy proposal would result in the erasure of customer-held FTT and FTX equity exceeding $700 million.
According to a court filing by FTX dated December 27, 2023, the only practicable method for initiating customer repayments is to calculate cryptocurrency prices using the date of the bankruptcy petition.
FTX noted that insolvency courts had granted petition-date prices to petition-date competitors of Celsius Network, BlockFi, and Voyager Digital, among others, to evaluate customer claims.
