According to newly amended bankruptcy documents released by FTX creditor Sunil Kavuri, FTX creditors can only recover between 10-25% of their cryptocurrency holdings.
Activist and FTX creditor explained that creditors will receive reimbursements based on the value on the day of filing, when cryptocurrency prices had plummeted with Bitcoinâs price at the time the petition was filed being around $16,000.
Kavuri shared that the decision to repay creditors and customers at the price on the filing date caused outrage in the FTX creditor community:
âCryptocurrency holders were not entitled to their full value at the date of filing, as the debtors, the Department of Justice, and Judge Kaplan have confirmed. Many FTX customers continue to suffer from mental anguish, panic attacks, divorce, and suicidal thoughts because their life savings were stolen and the assets have not been returned.â
Other creditors also agreed with Kavuri's view.
âIt's disgusting that they sneaked this into the plan so late, after the vote,â said one user.
âI donât understand why the law canât protect us, the investors,â another creditor asked, describing FTXâs collapse as a scam.
Another creditor commented: âWhat a shame, we have been cheated twice!â
Kavuri also argued that Sam Bankman-Fried violated FTXâs terms of service and the definition of ownership by using customer funds to pay off outstanding debts:
âThe terms of service clearly state that ownership of the digital assets belongs to FTX customers. Sam was clearly convicted of violating the terms of service and diverting customer funds to pay off Alamedaâs debt and buy Robinhood stock.â
On September 6, 2024, FTX Estate reached an agreement with Emergent Technologies â an entity founded by Bankman-Fried â to secure $600 million in Robinhood shares to pay off creditors.
Other Challenges to Bankruptcy Restructuring Plans
Kavuri and his supporters are not the only ones opposing FTX's restructuring plan. In August 2024, a U.S. trustee overseeing the bankruptcy proceedings objected to the plan, arguing that it granted too many legal protections to the managers and representatives of the FTX estate.
In legal filings, trustee Andrew Vara stressed that these protections are not the norm in similar cases and are a troubling anomaly:
âSuch immunity would far exceed the protection that insolvency professionals, whose employment and compensation are subject to the Courtâs approval and supervision, receive throughout the case.â
The U.S. Securities and Exchange Commission (SEC) also said it could object to FTXâs restructuring plan if the exchange decides to reimburse customers in stablecoins.
