Key Takeaways:
- FTX Debtors submit a revamped Plan of Reorganization, drawing attention for its notable deviation from FTX Trading’s original Terms of Service (TOS).
- Filed recently, this revised plan follows an agreement with creditor stakeholders reached back in October.
Under the leadership of CEO John Ray III and legal representation from Sullivan & Cromwell, the FTX debtors’ estate has submitted an updated Chapter 11 Plan of Reorganization, unveiling a contentious shift in the valuation of cryptocurrency claims.
A crucial aspect of this reorganization plan revolves around the retroactive valuation of customer asset claims to the pivotal date of the cryptocurrency exchange FTX’s collapse on November 11, 2022. This move has stirred controversy, primarily concerning the approach to appraising digital assets.
In contrast to FTX’s Terms of Service (TOS), which previously acknowledged digital assets as the property of users, the amended plan proposes valuing these assets based on their conversion rates as of the bankruptcy filing date. This departure from FTX’s initial policy has ignited concerns regarding its implications for users and their holdings.
According to a recent court filing in the United States Bankruptcy Court for the District of Delaware, any customer entitlement claim against FTX will be based on the asset’s value as of the date the exchange filed for bankruptcy.
Notably, the collapse of FTX triggered a market dip that has since rebounded, with the global crypto market cap surging from approximately $856 billion to $1.6 trillion today.
FTX’s native token has also nearly doubled in value during this period, raising the stakes for creditors potentially facing millions in unrealized gains if the proposed plan is approved.
Sunil Kavuri, a vocal FTX creditor, contends that the reorganization plan contradicts FTX’s Terms of Service, alleging that the exchange’s founder, SBF, was convicted of stealing digital assets owned by FTX customers.
The plan introduces a customer preference settlement, designed to address specific claims and actions related to customer entitlements.
Subject to court approval, this settlement aims to be fair and equitable for all parties involved. Additionally, the plan includes provisions for substantive consolidation, proposing the merging of the estates of the Consolidated Debtors into a single entity for implementation.
As the FTX Debtors forge ahead with this plan, the deviation from the original Terms of Service regarding digital asset ownership signifies a pivotal moment in the restructuring efforts of the bankrupt company. The controversy surrounding the retroactive valuation of cryptocurrency claims adds a layer of complexity to the ongoing Chapter 11 proceedings.
