According to Cointelegraph: Following the collapse of FTX and its token (FTT) — which saw a dramatic value loss of more than 80% and wiped out over $2 billion in customer value — new bankruptcy documents reveal a grim outlook for creditors. According to FTX creditor Sunil Kavuri, creditors will likely recover only 10-25% of their cryptocurrency holdings.

Kavuri, an active voice among FTX creditors, explained that reimbursement would be based on cryptocurrency prices from the petition date, which was much lower than today's valuations. At the time of the bankruptcy petition, Bitcoin (BTC) was trading at approximately $16,000, significantly lower than its current price of around $65,640.

This decision to base reimbursements on petition date prices has sparked widespread discontent among creditors. Kavuri told Cointelegraph, "Crypto holders are not whole at petition date prices as confirmed by the debtors, DOJ, and Judge Kaplan. Many FTX customers continue to suffer from mental distress, panic attacks, divorces, and suicidal thoughts as their life savings have been stolen and property still has not been returned."

The outrage among creditors is palpable, with some expressing dismay over what they perceive as an unfair last-minute change to the reorganization plan. One creditor called it "disgusting," while another questioned why the law couldn't provide better protection for investors.

Kavuri also criticized FTX founder Sam Bankman-Fried for violating the platform's terms of service. He argued that Bankman-Fried had breached property rights by diverting customer funds to cover debts, including loans at Alameda Research and purchasing Robinhood shares. "The terms of service are unambiguous that title of digital assets is owned by the FTX customer. Sam was convicted beyond reasonable doubt for breaking the terms of service and transferring customer funds," he stated.

On September 6, 2024, the FTX estate reached an agreement with Emergent Technologies, a company founded by Bankman-Fried, to seize $600 million in Robinhood shares to reimburse creditors.

Broader Opposition to the Reorganization Plan

Kavuri and his followers are not alone in opposing FTX's reorganization plan. In August 2024, a U.S.-based trustee overseeing the bankruptcy process filed an objection, arguing that the plan provided excessive legal protections for administrators and representatives of the FTX bankruptcy estate.

Trustee Andrew Vara highlighted that these protections were far beyond what was typically granted in similar cases, raising concerns about transparency and accountability: "Such immunity would far exceed the protections that estate professionals, whose employment and compensation are subject to Court approval and oversight receive during the case."

The United States Securities and Exchange Commission (SEC) also suggested they might oppose the reorganization plan if it includes reimbursement in stablecoins, citing concerns over the approach.

FTX's bankruptcy has not only left creditors in financial turmoil but has also sparked questions about the protections available for investors in the cryptocurrency sector. As the bankruptcy proceedings continue, creditors and regulators alike are pushing for a resolution that better respects the rights and financial well-being of those affected by FTX's collapse.