FTX clients seek larger payouts as crypto prices jump

abdelaziz Fathi

Several clients of the now-defunct cryptocurrency exchange FTX are disputing the method the company plans to use for valuing their deposits in the ongoing bankruptcy proceedings.

FTX founder and former CEO Sam Bankman-Fried

These clients have appealed to a U.S. bankruptcy judge, arguing against FTX’s plan to base cryptocurrency values on prices from 2022, a move they claim prevents them from benefiting from the recent surge in crypto prices.

The dispute centers around a motion filed by FTX’s debtors, stating that if the court finds crypto deposits are not property of the estate, these assets must be returned “in kind” to customers. The value of the cryptocurrencies has appreciated by over $5 billion since FTX filed for bankruptcy.

FTX’s bankruptcy plan involves reimbursing customers in U.S. dollars based on the crypto prices at the time of its bankruptcy filing in November 2022. Customers argue that this method undervalues their assets due to the recent market recovery.

The Official Committee of Unsecured Creditors believes that a collective estimation of claim values is the most efficient and expeditious way to reconcile claims and proceed with the Chapter 11 confirmation. However, FTX creditor activist Sunil Kavuri, through his lawyers Moskowitz and Boies, raised objections to this approach, advocating for customers to receive “at least the value of crypto back,” given unresolved property rights.

Before the Thursday deadline, FTX customers globally submitted numerous letters to the U.S. bankruptcy court, challenging FTX’s valuation method. The court is expected to review FTX’s list of cryptocurrency prices in a hearing on January 25 in Wilmington, Delaware. Critics of the proposal argue it is unfair to holders of volatile assets like Bitcoin, Ether, and Solana, whose values have risen significantly since FTX’s bankruptcy. They also oppose FTX’s decision to value its equity shares and token, FTT, at $0, which would erase over $700 million in FTT and FTX equity held by customers.

In its defense, FTX stated that using bankruptcy petition-date prices is the only practical method for kicking off customer repayments. The exchange cited precedents where courts allowed other bankrupt crypto firms like Celsius Network, BlockFi, and Voyager Digital to use petition-date prices for assessing customer claims.

The debate follows the court’s earlier authorization for FTX to liquidate nearly $3.4 billion in cryptocurrency assets. To mitigate potential adverse impacts on the market, the court directed that these assets be sold in tranches, with each batch not exceeding $50 million to $100 million in value.

  • Read this next

    Retail FX

    Weekly Roundup: FX prop firms switch to cTrader, who moved $1.35B BTC?

    The foreign exchange and cryptocurrency markets are always active, and this past week was no exception. Stay ahead with a selection of essential stories and updates that matter most to market participants.

    Digital Assets

    Bitcoin breaks all records with a massive $1.347 billion transaction

    This transaction has surpassed previous records, setting a new benchmark for Bitcoin trades. Before this event, the largest Bitcoin transactions included a $1.1 billion trade in April 2020 involving 161,500 BTC, and other significant transactions ranging from $491 million to $1.033 billion throughout 2019 and 2020.

    Digital Assets

    Uniswap debuts Ethereum ‘uni.eth’ subdomains

    Decentralized exchange platform Uniswap has integrated Ethereum Name Service (ENS), allowing users to create human-readable domain names and cryptocurrency wallet addresses using .eth endings.


    Magic Square Expands with TruePNL Acquisition

    Binance’s web3 app store, Magic Square, acquired token platform TruePNL in a cash deal this week for an undisclosed sum. The deal brings TruePNL’s infrastructure (excluding branding & token) under Magic Square’s wing. Initially seeking a partnership, Magic Square opted for a full acquisition.

    Crypto Insider

    The Future of Prediction Markets? Zeitgeist Launches Decentralized Court System

    Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.

    Digital Assets

    Crypto exchange Kraken fires back at SEC lawsuit, claiming overreach

    Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), seeking to toss out a lawsuit that accused the platform of operating without proper registration.

    Industry News

    Exness Named a Best Place to Work in 2024

     Global leader Exness, tops in retail trading volume, earns 2024 “Best Place to Work” award, cementing its employee-centric culture after three prior years of winning the Cyprus national title.

    Digital Assets

    Swan Bitcoin taps Bakkt for crypto offering in the US

    “We are thrilled to be taking this exciting step forward in our partnership with Swan. This is just the beginning of our collaboration, as we intend to explore further growth opportunities together in the future, including expansion into international markets.”

    Digital Assets

    Polkadot Awards Bifrost a 500,000 DOT Loan to Enhance Liquid Staking Adoption

    Bifrost, a leader in liquid staking solutions, has secured a 500,000 DOT loan from Polkadot’s treasury to expand the reach and utility of its vDOT product within the ecosystem.