Dozens of FTX customers have asked a U.S. bankruptcy judge to stop the collapsed crypto exchange from using 2022 prices to value their cryptocurrency deposits, saying that FTX is preventing its customers from benefiting from a rebound in crypto prices.
One FTX customer, Anthony Maurin, said in a Thursday letter to U.S. Bankruptcy Judge John Dorsey in Delaware, who is overseeing FTX's Chapter 11 proceedings, that he felt "aggrieved and robbed" when FTX's bankruptcy prevented him from accessing his account, and called the exchange's bankruptcy plan a "second act of theft."
The plan would pay customers back in U.S. dollars, based on cryptocurrency prices at the time that FTX filed for bankruptcy in November 2022. While FTX says that U.S. bankruptcy law calls for claims to be valued based on that date, FTX customers argue that the approach undervalues volatile cryptocurrencies that have greatly increased in value since the market bottomed out in 2022.
In addition to Maurin, FTX customers from around the world have filed dozens of similar letters in U.S. bankruptcy court over the past few days, ahead of a Thursday deadline for objecting to FTX's valuation method. FTX will seek approval of its list of cryptocurrency prices at a Jan. 25 court hearing in Wilmington.
Some customers said the proposal is "grossly unfair" to holders of bitcoin and other volatile assets and will result in preferential treatment for customers who held stablecoin and outside investors who bought FTX bankruptcy claims for cheap.
Three of the largest cryptocurrencies held by FTX customers — Bitcoin, Ether and Solana — have substantially increased in price since FTX's bankruptcy.
The price of Bitcoin has risen to about $46,000 from its November 2022 price of $16,871.63, and Solana has risen to about $98 from $16.25. Ether has nearly doubled in price over the same period. For each cryptocurrency, FTX's bankruptcy plan would pay customers a percentage of the November 2022 price.
Some FTX customers have also opposed the company's decision to value its equity shares and its own proprietary crypto token, FTT, at $0. FTX customers held over $700 million in FTT and FTX equity, which would be wiped out under the bankruptcy plan.
FTX said in a Dec. 27 court filing that fixing crypto prices based on the date of its bankruptcy petition is the only practical way to move forward and begin repaying customers.
Courts have allowed other bankrupt crypto companies — including Celsius Network, BlockFi, and Voyager Digital — to use petition-date prices when valuing their customers' claims, FTX said.
FTX's approach will allow it to calculate a percentage recovery for its customers and allow customers to make an informed decision on whether or not they will support FTX's bankruptcy plan, the company said.
FTX's official creditors committee and an ad hoc group of non-U.S. customers has agreed to support FTX's proposal.
FTX, which collapsed in November 2022, has committed to using at least 90% of its assets to repay customers.
The case is FTX Trading Ltd, U.S. Bankruptcy Court for the District of Delaware, No. 22-11068.
The case is In re FTX Trading Ltd, U.S. Bankruptcy Court for the District of Delaware, No. 22-11068.
For FTX: Brian Glueckstein, Andrew Dietderich, James Bromley and Alexa Kranzley of Sullivan & Cromwell
For the official creditors committee: Kris Hansen and Kenneth Pasquale of Paul Hastings
For the ad hoc committee of non-U.S. customers of FTX.com: Erin Broderick of Eversheds Sutherland
Read more:
FTX resolves dispute with Bahamian liquidators
FTX defends pace of bankruptcy amid creditor unrest
Sam Bankman-Fried convicted of multi-billion dollar FTX fraud
Jumpstart your morning with top legal news delivered straight to your inbox from The Daily Docket.
