New bankruptcy documents from FTX reveal that creditors may only recover 10-25% of the value of their cryptocurrency. Sunil Kavuri, an activist and creditor, stated that the reimbursement will be based on the cryptocurrency’s value at the time the bankruptcy was filed, when Bitcoin was priced at around $16,000, much lower than its current value.
This has sparked outrage among creditors, as many believe they are not receiving the actual value of their assets at present. Some FTX creditors also revealed that the situation has caused significant psychological distress, leading to panic and even suicidal thoughts.
Sunil Kavuri accused Sam Bankman-Fried of violating FTX’s terms of service by using customer funds to settle unpaid debts, including transferring money to Alameda and purchasing Robinhood shares.
FTX’s terms of service affirm that ownership of digital assets belongs to the customers, but these actions violated that principle. On September 6, 2024, FTX reached an agreement with Emergent Technologies, a company founded by Bankman-Fried, to use $600 million worth of Robinhood shares to pay off creditors.
In August 2024, trustee Andrew Vara opposed FTX’s reorganization plan, arguing that the plan provided excessive legal protections to the managers and representatives of the FTX estate, which is uncommon in similar bankruptcy cases.
Vara warned that this exemption exceeded the standard legal protections usually granted to bankruptcy professionals. The U.S. Securities and Exchange Commission (SEC) may also object to the plan if FTX opts to reimburse customers using stablecoins.
