FTX’s Revised Plan Could Disadvantage Creditors
FTX, once a giant in the digital currency space, is navigating turbulent times following its collapse. The exchange’s collapse has complicated financial matters, leaving creditors and claimants reeling in uncertainty.
Unexpectedly, FTX proposes a bold move in its bankruptcy case. Under the leadership of CEO John Ray III, the exchange presents a new Chapter 11 plan. This plan proposes an interesting way to resolve bankruptcy claims.
Significant changes in valuation. In a notable change, FTX’s plan proposes to value claimants’ digital assets in monetary terms pegged to the bankruptcy date of November 11, 2022. This pivot occurs during the market recovery following the fall of FTX, with the total market cap jumping from $850 billion to $850 billion. It amounts to a whopping $1.6 trillion.
Digital currency markets remain resilient despite adversity, with assets such as Bitcoin, Ethereum, Solana, and FTT soaring more than 100% following FTX’s bankruptcy filing. Solana stands out, boasting an impressive 600% rise.
Sunil Kavuri, a major creditor affected by FTX’s downfall, voiced concern. He highlights the contradictions between the reorganization plan and FTX’s initial terms of service. This provision asserted that customers, not exchanges, had ownership of digital assets.
FTX makes it clear in its revised plan that this change is not yet finalized. Certain groups of creditors must vote on these amendments. However, the plan stipulates that as long as the solution is deemed ‘fair and equitable’, opposing creditors can be forced to accept it regardless of their position.
While FTX’s strategy aims for fairness, it raises questions about the true value of digital assets in volatile markets, potentially resulting in significant losses for creditors.