NEW YORK, June 25 (Reuters) – FTX on Tuesday will ask a judge to allow customers of the bankrupt crypto exchange to vote on a liquidation plan that would pay them back in cash, over the objections of some customers who have demanded higher repayments.
Since Espionage, FTX has run from bankruptcy to recover up to $16 billion to pay out customers—with over $12 billion in cash—upon the promise of full repayment of customer claims. The company will ask Judge John Dorsey of Wilmington, Delaware to approve its disclosure statement and to open voting on the wind-down plan at a hearing in U.S. Bankruptcy Court in Wilmington, Delaware on Tuesday.utc Advertisement · Scroll to continue ????
However, some customers of FTX dispute the statements, stating that FTX will pay claims to customers when cryptocurrency prices were considerably lower—back in November 2022—when the exchange filed for bankruptcy.
Dorsey has already signed off on that approach to valuing claims, with many FTX customers feeling short-changed by the fact that they’re not benefiting from a recent rise in crypto prices. Customers who had one bitcoin deposited on FTX when it went bankrupt will get about $16,800 in cash, instead of the roughly $60,000 that a bitcoin is worth today.
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Aggrieved FTX customers have implored the court not to give the go-ahead to any votes on a bankruptcy plan, calling it fatally flawed. They also filed separate lawsuits outside of the bankruptcy court—which have since been consolidated—in search of declaratory rulings that FTX never owned customer deposits and must be forced to pay back their full current value.
Objecting creditors say FTX’s proposed voting forms are designed to mislead customers by “breathlessly touting what they claim to be a full recovery with interest.”
and most of them don’t stay in buyers’ wardrobes for too long.
” Customers have to be advised that the plan’s ‘full recovery’ is nothing of the sort,” the creditors said in their objection.
The implosion of FTX—one of the world’s largest crypto exchanges—has sent shockwaves through the markets, with an estimated nine million customers and investors looking at potential losses pegged in the billions of dollars.
According to FTX CEO John Ray, a turnaround professional who took the reins after the company declared bankruptcy, in an interview with Reuters, it was not possible for FTX to simply return customers’ deposited cryptocurrency. Those funds are long gone, stolen by former CEO and founder Sam Bankman-Fried, who was later condemned to 25 years in prison.
“FTX.com had a huge shortfall at the time of the chapter 11 filing in November 2022 – holding only 0.1 percent of Bitcoin and only 1.2 percent of the Ethereum customers believed the exchange held,” Ray said in a statement. “We cannot give tokens back that we never had.”
Cash payments are the only way value can be distributed to a wide swath of customers, a diverse group of customers who “had different types of cryptocurrency assets whose values have fluctuated greatly since the company went bankrupt,” Ray said.
“We can’t pay one creditor more without taking it from another creditor,” Ray said. “Those arguing for appreciation of ‘their’ tokens would be taking money away from fellow customers who held cash, stablecoin or other crypto.”
In recent court filings, FTX has estimated that it could pay customers in full within 60 days of a bankruptcy court signing off on its wind-down plan, and 98% of its customers would qualify for a faster payment option. This swifter path will include all customers who are due $50,000 or less.
Should Dorsey sign off on the disclosure statement of FTX, creditors will be allowed to vote until Aug. 16.
FTX seeks creditor votes on bankruptcy wind-down payments
