In the last stages of the FTX bankruptcy plan, a new update will see investors receive only a tiny fraction of their locked funds back
Creditors of the bankrupt FTX exchange who anticipated a full recovery of their assets might face disappointment soon. FTX creditor Sunil Kavuri shared a revelation that creditors will get less than one-third of their assets back.
The arrangement is part of the newly revised bankruptcy documents. Notably, this decision is causing an uproar among creditors anticipating the full recovery of their funds.
Is FTX ‘Scamming’ Creditors Again?
At the time of the collapse, FTX wiped out over $8 billion of customer assets. The recent development means FTX customers will only reclaim 10% and 25% of their lost assets. The court document shared by Kavuri reveals that FTX will transfer 18% of forfeited funds from the U.S. Department of Justice (DOJ) to the tune of $230 million.
This suggests that creditors will suffer significant losses as only a fraction of what they previously held will be returned. This is a notable shift from the previous arrangement, under which the defunct exchange used recovered funds to settle 100% of creditors’ losses.
Understandably, creditors are upset and have voiced their frustration at the development. Some have questioned how the authorities allowed FTX to ‘sneak in’ this clause so late into the plan after creditors had voted.
A creditor on X with the user name BLOCKHEAD (@slapmylovespuds) stated, “Disgraceful, we have been scammed twice!”
Reasons for FTX Creditors’ Dissatisfaction
The new calculation needs to be more satisfactory to creditors. As Kavuri explained, FTX’s compensation to creditors will be based on the value of their crypto assets on the bankruptcy filing date, not the current market value.
When FTX filed for bankruptcy, Bitcoin, for instance, stood at about $16,000, a value far lower than its current $65,000 worth.
In August, U.S. District Judge Peter Castel granted a consent order binding on FTX and its affiliate, Alameda Research. As per the order, they are to pay a total of $12.7 billion to customers and victims of the exchange as compensation.
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