FTX Bankruptcy Sparks Debate Over Crypto Values
FTX's restructuring plan, helmed by CEO John Ray III and legal advisors from Sullivan & Cromwell, has rattled stakeholders.
The revised Chapter 11 proposal aims to assess crypto claims based on their initial value during the exchange’s bankruptcy filing last year rather than their current market rates.
The reverberations from FTX’s 2022 collapse persist within the crypto domain, raising doubts about the industry’s future. This collapse triggered a downward spiral in crypto prices, leaving lingering uncertainties.
At the time of FTX’s bankruptcy, Bitcoin stood at around $17,000, a mere fraction of its peak at $69,000. Subsequently, the crypto market has shown signs of recovery, with Bitcoin currently trading at $42,000.
In a recent filing with the United States Bankruptcy Court for the District of Delaware, FTX’s debtor estate proposed evaluating customer claims against the exchange based on their value when the exchange folded. If approved, this process would involve converting crypto assets to cash for creditor distribution.
Naturally, this proposal has stirred controversy, especially among FTX creditors. They argue that valuations should align with current asset values to ensure full repayment. According to vocal FTX creditor Sunil Kavuri, this stance contradicts FTX’s Terms of Service, which emphasizes customers’ ownership of digital assets.
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FTX owed over $8.7 billion to customers and creditors at the time of filing for bankruptcy. A US judge permitted the liquidation of FTX’s crypto assets, valued at over $3.4 billion, and later sanctioned the sale of assets from crypto trusts worth $873 million in November.
Efforts by the FTX estate to recoup funds for creditor settlements have been extensive. However, a clear timeline for complete repayment remains elusive, leaving many uncertain about the retrieval of their crypto assets in full.
In a recent transaction, FTX transferred 1,593 ETH valued at $3.66 million to a private wallet reportedly linked to Coinbase, according to on-chain tracker Spotonchain. Meanwhile, former CEO Sam Bankman-Fried remains in custody awaiting sentencing scheduled for March 2024.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
