Introduction
The recent decision made by FTX debtors has sparked intense debates and discussions within the cryptocurrency community. This comes amidst the backdrop of significant price fluctuations in the crypto market since the filing.
The Retroactive Assessment of Customer Claims
FTX debtors have presented a revamped Chapter 11 reorganization plan, unveiling their intention to assess the value of customer claims retroactively. Specifically, they aim to evaluate these claims as of the date when the exchange filed for bankruptcy on November 11, 2022. The proposed plan suggests that any claim aimed at compensating the claimant will be based on the value of the crypto asset at the time of the bankruptcy filing.
Determining the Value of Claims
To ascertain the value of these claims, a conversion table will be utilized, incorporating conversion rates specified at the time of the bankruptcy filing. However, this approach has raised concerns within the cryptocurrency community due to the substantial increase in cryptocurrency prices following the filing. For instance, Bitcoin (BTC) was valued at $17,036 during the filing, but as of the time of this report, it has surged to $42,272.
Complexities Surrounding FTX Bankruptcy
Joseph Moldovan, Chair of Business Solutions, Restructuring, and Governance Practices at Morrison Cohen, a prominent New York-based law firm, emphasizes the exceptional nature of the FTX bankruptcy case. He highlights the complexity posed by the debtors as significant entities carrying substantial debt. This intricacy has added an extra layer of complexity to the bankruptcy proceedings, rendering it a closely monitored case of interest in both the legal and cryptocurrency communities.
The Ongoing Debate
FTX’s decision to value crypto claims based on market prices at the time of the filing has ignited a heated debate in the cryptocurrency community. Supporters argue that it ensures fairness by accurately reflecting the circumstances at the time of the exchange’s collapse. Conversely, critics argue that it fails to consider the considerable price gains that have occurred since the initial filing. This rising value, especially in cryptocurrencies like Bitcoin, has left some customers concerned about potential undervaluation of their claims if the plan is approved.