Thomas Daniels
Following the collapse of cryptocurrency exchange FTX, its native token, FTT, plummeted by over 80%, erasing more than $2 billion in customer funds. According to newly revised bankruptcy documents, creditors are projected to recover only 10-25% of their cryptocurrency holdings, as revealed by FTX creditor and activist Sunil Kavuri.
Kavuri explained that reimbursements will be calculated based on cryptocurrency prices at the time of the bankruptcy petition in 2022, when Bitcoin (BTC) was trading at approximately $16,000. Current Bitcoin prices have surged significantly, making the petition date valuation a contentious issue among creditors.
The decision to use these outdated prices has incited backlash. Kavuri shared with Cointelegraph that many FTX customers, who lost their life savings, continue to suffer mentally and emotionally. “Crypto holders are not made whole at petition date prices,” he stated, echoing the frustration of many affected by the exchange’s collapse.
In addition to the financial losses, critics argue that the FTX estate’s reorganization plan was unfairly altered after creditors had already voted on it. One creditor expressed their dismay, stating, “It’s disgusting they sneak this into the plan so late.” Others have called the collapse and subsequent handling of the bankruptcy process a scam, with one creditor lamenting, “We have been scammed twice!”
Kavuri further accused Sam Bankman-Fried, FTX’s founder, of violating the exchange’s terms of service by misusing client funds to cover debts and acquire Robinhood shares. “The terms of service clearly state that digital assets are owned by the customer,” Kavuri said. Bankman-Fried has since been convicted for mishandling customer assets.
In a notable development, the FTX estate reached a deal with Emergent Technologies, a Bankman-Fried entity, to secure $600 million worth of Robinhood shares to help compensate creditors. However, this arrangement has done little to alleviate concerns, with several objectors challenging the overall reorganization plan.
In August 2024, U.S. trustee Andrew Vara, overseeing the FTX bankruptcy, filed a legal objection to the plan, arguing it provides excessive legal protections to FTX estate representatives. Vara described the immunity provisions as “an alarming anomaly,” far exceeding typical bankruptcy protections.
The U.S. Securities and Exchange Commission (SEC) has also expressed potential opposition to the reorganization plan, particularly if FTX opts to reimburse clients through stablecoin payments instead of direct cryptocurrency compensation.
