A recent ruling by a US bankruptcy court has granted FTX permission to proceed with a liquidation plan that would see customers receive cash payouts for their claims, as reported by Reuters on June 25. The plan involves paying customers based on the prices of cryptocurrencies at the time of FTX’s collapse in November 2022, despite objections from some customers who argue that the current value of cryptocurrencies has risen since then. The proposed cash payment plan has sparked controversy, with some creditors claiming that FTX is misleading customers by suggesting a full recovery with interest when, in reality, the funds being offered fall short of what customers are entitled to.
According to Reuters, customers who held one Bitcoin with FTX in 2022 would receive $16,800 under the proposed plan, which is significantly lower than the current value of each BTC. Creditors expressed their concerns over the disparity as early as May, prompting FTX to seek approval for the plan through a voting process that will run until Aug. 16. The final approval for the plan is expected to be sought on Oct. 7. FTX CEO John J. Ray III emphasized that it is impossible for the company to return the original amounts of cryptocurrency deposited by customers due to the company’s financial constraints at the time of bankruptcy.
Ray stated, “We cannot give tokens back that we never had,” highlighting the fact that FTX only held a fraction of the Bitcoin and Ethereum reflected in customer balances when it declared bankruptcy in 2022. The CEO also cautioned against customers demanding appreciated value, as this would mean taking money away from other customers. Despite the ongoing controversy, a majority of customers are expected to receive their full claims within 60 days of the bankruptcy court approving FTX’s wind-down plans, with a faster payment option available for claims under $50,000. Reports from Bloomberg suggest that FTX currently has $11.4 billion in assets, with the potential to increase this amount to $12.6 billion by the end of October.
The decision by the US bankruptcy court to grant FTX approval to move forward with its liquidation plan has brought to light a heated debate among customers who are set to receive cash payouts for their claims. The proposed plan, which would pay customers based on cryptocurrency prices at the time of FTX’s collapse in November 2022, has faced criticism from creditors who argue that the current value of cryptocurrencies has risen significantly since then. Some customers have raised concerns over the disparity between the proposed payouts and the actual value of their claims, with objections surfacing as early as May.
Despite the objections, FTX CEO John J. Ray III has defended the company’s position, stating that it is simply not feasible to return the original amounts of cryptocurrency deposited by customers due to the company’s financial difficulties at the time of bankruptcy. Ray emphasized that FTX only held a small fraction of the Bitcoin and Ethereum reflected in customer balances, making it impossible to reimburse customers with their original deposits. Moreover, Ray warned against customers demanding appreciated value, as this would mean diverting funds from other customers who are also entitled to compensation.
While the controversy surrounding the cash payment plan continues to unfold, FTX is moving forward with the process of soliciting votes from customers, which will run until Aug. 16. The company is expected to seek final approval for the plan on Oct. 7, despite the ongoing debate over the fairness of the proposed payouts. It is anticipated that the majority of customers will receive their full claims within 60 days of the bankruptcy court approving FTX’s wind-down plans, with a faster payment option available for smaller claims under $50,000. Reports from Bloomberg indicate that FTX currently possesses $11.4 billion in assets, with the potential to increase this amount to $12.6 billion by the end of October.
In conclusion, the recent developments surrounding FTX’s bankruptcy and the approval of its liquidation plan highlight the complex challenges faced by customers seeking compensation for their claims. The debate over the proposed cash payouts based on cryptocurrency prices at the time of FTX’s collapse underscores the need for a fair and transparent resolution that takes into account the interests of all parties involved. As FTX moves forward with the implementation of its liquidation plan, it remains to be seen how the controversy will be resolved and how customers will ultimately be compensated for their losses.
