Revised bankruptcy documents shared by FTX creditor Sunil Kavuri showed that some FTX customers are only going to receive a maximum of 25% of their original funds.
FTX was once a popular, second-ranked crypto trading platform in the crypto space, but in November 2022, the exchange collapsed after a news report covered by popular crypto media outlet Coindesk. The report revealed issues with FTXâs backend funds. As per the report, FTX was not holding customersâ funds in reserve, and subsequent investigations found that FTX had misused a majority of the customersâ funds for personal benefits.
On 28 Sep 2024, FTX creditor-activist Sunil Kavuri shared revised bankruptcy documents, noting how the FTX bankruptcy leaders had cleverly used the volatile nature of cryptocurrencies to ultimately keep FTX creditors from receiving full compensation.
Sunil noted that some FTX creditors will only get back 10%-25% of their cryptocurrencies. Creditors will be repaid based on the price of cryptocurrencies on the filing date when prices were much lower than current levels. At that time, the price of Bitcoin (BTC) was around $16,000. The decision to use the filing date price for repayments has sparked dissatisfaction among creditors and customers.
The latest revised bankruptcy documents shared by FTX creditor Sunil Kavuri show that some FTX creditors can only get back 10%-25% of their cryptocurrencies. Creditors will be repaid based on the filing date, when cryptocurrency prices were much lower than current levels. At thatâŠ
â Wu Blockchain (@WuBlockchain) September 29, 2024
In short, FTXâs repayment plan is under criticism from the crypto community, and there is a high chance that FTX may face legal challenges for its unfair compensation plan.Â
In August of this year, the United States Securities and Exchange Commission (SEC)âs lawyers noted that while creditor repayments made with stablecoins may not be technically illegal, they reserved the right to challenge repayments made with US dollar-pegged crypto assets.Â
The SEC warned it could challenge stablecoin-denominated creditor repayments. Source: Kroll
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