Asset valuation based on past cryptocurrency prices
The FTX debtor’s revised Chapter 11 reorganization plan filed Dec. 16 sets out a method for valuing creditor assets that could result in significant financial losses. This approach relies on using cryptocurrency prices since November 11, 2022, the date FTX filed for bankruptcy.
Decline in the cryptocurrency market
The period prior to the FTX collapse saw a significant downturn in the cryptocurrency market. This decline was further exacerbated by the exchange’s declaration of bankruptcy, which led to a prolonged bear market until 2023.
Comparative loss of cryptocurrency value
On the important day of November 11, the value of major cryptocurrencies was significantly lower than their current prices. These differences represent significant potential losses for creditors. For example, the value of Bitcoin (BTC) was just over $17,500 at the time, but its current price has soared to over $41,649.57. This represents a huge loss exceeding $24,000 per BTC.
Ethereum price increase
Ethereum (ETH) also showed a similar trend, rising from approximately $1,284 to $2,214. Therefore, creditors will suffer a loss of close to $1,000 per ETH.
Ignoring Terms of Service
Affected FTX creditor Sunil Kavuri says the proposed restructuring plan overlooks FTX’s terms of service. These Terms explicitly state that digital assets belong to you and not to FTX Trading.
Creditors Vote on the Plan
Certain creditor groups will have the opportunity to vote on this reorganization plan before it is finalized.
Despite the procedural advancements, this reorganization plan ignores the fundamental rights and financial well-being of numerous FTX creditors.