The puzzle left by former FTX CEO Sam Bankman-Fried is proving a tough nut to crack as victims of the bankruptcy have now filed an application in court. As per the motion, they are praying the court to return the $8 billion in forfeited assets from the defunct crypto exchange to its customers rather than the bankruptcy estate.
This development was revealed in a filing submitted to the U.S. District Court for the Southern District of New York.
Determining Fair FTX Asset Allocation
The FTX bankruptcy estate had proposed a reorganization plan intended to reimburse 98% of creditors with 118% of their claims in cash within 60 days of court approval. However, most of the customers who have been unable to benefit from the recent surge in cryptocurrency prices while their funds remain tied up in the bankruptcy proceedings are unhappy.
Significantly, the FTX filed for bankruptcy during the “crypto winter,” a period marked by a notable drop in cryptocurrency prices. Now that the crypto world is in “summer,” the investors are requesting for justice.
Notably, the filing argues that evaluating customer claims based on the values at that time would be grossly unfair. The victims pointed out that the price of Solana (SOL) has increased ninefold and Bitcoin has quadrupled since the bankruptcy filing.
Legal Arguments and Customer Grievances
Attorneys Adam Moskowitz and David Boies, representing the victims, stated in the filing that the bankruptcy process has left FTX customers feeling “aggrieved and robbed,” with many viewing it as a “second act of theft.”
They further contended that the “FTX bankruptcy estate remains the same fraudulent corporate entity” as it was under the leadership of former CEO Sam Bankman-Fried, who has been sentenced to 25 years in prison for fraud.
The victims’ filing also noted that based on the current structure, it was unlikely that a certain class of holders of that token would receive compensation from the estate. This is because the bankruptcy code mandates prioritizing certain creditors, leaving holders of FTX’s FTT token near the bottom of the priority list.
How Will FTX Asset Legal Resolution End?
Speaking on the development, Moskowitz stated, “We don’t know what the damages will be because complete accounting has not been done.” Although the fluctuating value of cryptocurrencies may affect the total amount, “it is safe to say that over $8 billion” in damages are owed.
Legal experts maintain that the dust raised by Bankman-Fried will take a while to settle. The FTX’s collapse occurred in November 2022, a major event that shook the crypto world.
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