It is, without a doubt, useless.
And yet the FTT token once peddled by failed crypto exchange FTX surged on Monday as a US bankruptcy judge declared the token worthless.
“I have no evidence today that the value of FTT tokens would be anything other than zero,” Judge John Dorsey, of the US Bankruptcy Court of the District of Delaware, said during a hearing Monday, overruling a request from creditors who held the token in their FTX accounts when the exchange collapsed.
That hearing, which lasted more than five hours, brought FTX’s two-year bankruptcy to a close.
Judge Dorsey approved FTX’s plan to repay its creditors, 98% of whom will receive all the money they lost, and then some. But, controversially, not all the crypto they lost.
This has infuriated some investors because those assets have increased in value since the exchange’s collapse. Instead they’ll get the monetary value of those assets at the time of the collapse back.
Up to $16.5 billion
FTX expects to distribute between $14.7 billion and $16.5 billion, making it “the largest and most complex bankruptcy estate asset distribution in history,” according to John Ray, the executive hired to lead the company through the bankruptcy process.
But crypto markets were muted. As of Tuesday morning London time, Bitcoin had dipped 1.7%, to about $62,400, since just before Judge Dorsey approved the repayment plan. It has recovered slightly since.
Ethereum had dipped 1.3%, to $2,430, and Solana — the cryptocurrency whose fortunes were most tied to FTX — had fallen 2.1%, to $145.
FTT jumps
At the same time, FTT jumped 20.1%, to $4.60.
Like other tokens issued by centralised exchanges, FTT granted holders certain privileges, such as lower trading fees on FTX.
Worth about $25 a token prior to the exchange’s collapse, it hovered around $1 for a year after FTX filed for bankruptcy, occasionally spiking along with reports that Ray was considering rebooting FTX.
Those plans have been dead for months, but FTT’s value refused to go with it.
Lawyers for the bankrupt exchange repeated Monday they had no plans to launch a new FTX, under that or any other name.
“FTT has no fundamental value because it has no utility outside of operating the ftx.com exchange,” said Brian Glueckstein, of Sullivan and Cromwell. “There is no and there will be no restarted ftx.com exchange.”
Over the course of the bankruptcy proceedings, some victims have railed against the decision to repay creditors exclusively in cash, rather than the assets they held on FTX at the time of its collapse.
According to FTX, some 98% of creditors will get 119% of their claims’ value. Those claims are based on the value of crypto in November 2022, when the company filed for bankruptcy and Bitcoin was trading for less than $20,000. This means creditors will miss out on the rally crypto has enjoyed since.
But FTX couldn’t pay customers in crypto because it never had that crypto, according to Steven Coverick, of Alvarez & Marsal.
Distributing repayments in-kind “would mean the debtors would have to purchase that cryptocurrency on the open market in order to make in kind distributions,” he said.
FTX “would then have to go purchase billions of dollars of cryptocurrencies in those quantities which would … result in a run up in the market.”
Despite the controversy surrounding in-kind payments, the vast majority of creditors supported the reorganisation in a vote earlier this year, according to court documents.
“I want to say congratulations,” Judge Dorsey said. “This is a model case for how to deal with a very complex Chapter 11 bankruptcy.”
Crypto market movers
Bitcoin is down over 2% over the past 24 hours to trade at $63,230.
Ethereum is down just under 3% to trade at almost $2,420.
What we’re reading
Was Len Sassaman the real Satoshi? We asked his widow about new HBO exposé — DL News
Is ‘Uptober’ for Bitcoin Prices Back in Full Swing After an Early ‘Rektober’? — Unchained
MicroStrategy’s Stellar Performance Won’t Lead To S&P 500 Inclusion Anytime Soon — Milk Road
EIP-7781 Aims to Boost Ethereum Throughput by 50% — Unchained
Molly White says there’s just one problem with US crypto voters — DL News
Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email at aleks@dlnews.com.
