FTX creditors stand to collectively lose millions under new reorganization plan
FTX Debtors filed an amended Chapter 11 reorganization plan on Dec. 16 that will potentially lead to millions of dollars worth of losses for the defunct crypto exchange’s creditors. The plan proposes valuing the creditors’ claims at crypto prices on Nov. 11, 2022, the day FTX filed its bankruptcy petition.
In the days leading up to the FTX collapse, the crypto market went into a downward spiral. The exchange’s bankruptcy filing triggered a bear market that lasted several months into 2023.
Therefore, on Nov. 11 last year—the bankruptcy petition date—major cryptocurrency prices were significantly lower than at the time of writing. This difference in the crypto prices means creditors will be left with sizable potential losses when compared to the value of their assets as per current market prices.
For instance, Bitcoin’s (BTC) price was just above $17,500 on Nov. 11, 2022, according to CryptoSlate data. Over the past year, however, Bitcoin price has more than doubled to $41,649.57 at the time of writing, CryptoSlate data shows. This indicates that FTX creditors will incur a loss of over $24,000 per BTC.
Similarly, Ethereum’s (ETH) price has grown from around $1,284 on Nov. 11 to $2,214 at the time of writing, CryptoSlate data indicates. For the defunct exchange’s creditors, that means a loss of nearly $1,000 per ETH.
Sunil Kavuri, an FTX creditor, noted in a post on X that the new reorganization plan ignores FTX’s Terms of Service, which “states Digital Assets are the property of Users and not FTX Trading.”
Certain classes of creditors will have the opportunity to vote on the plan before it is finalized.