Following the FTX exchange’s downfall that lead to a drastic 80% slump in the FTT token, wiping off $2 billion in consumer value, creditors may only recover a meagre 10–25% of their cryptocurrency investments, says FTX creditor Sunil Kavuri. The reimbursements, he explains, will be calculated based on the cryptocurrency prices on the petition date, which were significantly lower than current rates. For instance, Bitcoin was fairing at around $16,000 on the mentioned date.
The decision to compensate creditors and patrons using past prices has caused considerable discontent among the FTX creditors. Kavuri points out the human cost of the debacle, stating, “Many FTX customers continue to live with mental distress, panic attacks, divorces and suicidal thoughts as their lifetime savings have been robbed and property remains unreturned.” Other creditors share this sentiment, labeling the FTX collapse as a scam, and expressing their dissatisfaction with the lack of protection for investors by law.
Notably, accords Kavuri, FTX’s Sam Bankman-Fried violated the company’s terms of service and infringed on property rights by resorting to client funds to clear outstanding debts. Interestingly, the FTX estate reached an agreement with Emergent Technologies, founded by Bankman-Fried, on September 6, 2024, to use $600 million in Robinhood shares to reimburse its creditors.
However, the bankruptcy reorganization plan hasn’t been without its share of hurdles. A US-based trustee supervising the bankruptcy process voiced his concerns over the plan offering too many legal safeguards for administrators and representatives of the FTX bankruptcy estate. The United States Securities and Exchange Commission also hinted at opposing the plan if FTX chooses to remunerate clients via stablecoin payments.