FTX Trading Ltd. affiliated debtors have submitted a motion for the entry of an order estimating the value of claims related to digital assets and fiat currency, including customer entitlement claims.
In a filing made on December 27 in the United States Bankruptcy Court for the District of Delaware, the FTX debtors proposed estimating the value of various digital assets based on their prices at the time of the petition date, which was November 11, 2022.
The proposal by FTX debtors to estimate the value of digital assets listed prices for approximately 500 assets in fiat and cryptocurrency, based on those at the time of FTX’s bankruptcy filing.
The proposed values include Bitcoin at $16,871, Ethereum at $1,258, Solana (SOL) at $16, Avalanche (AVAX) at $14.19, and stablecoins like USDT, TUSD, and BUSD at values slightly less than their usual $1 peg. Notably, the proposal excluded an estimated FTX Token (FTT) price; however, it included prices for leveraged tokens, tokenized stocks, spot derivatives, and crypto futures.
The debtors argued that their valuations represent a “fair and reasonable” value of these digital assets as of the specified petition date. The court will need to review and approve these valuations as part of FTX’s bankruptcy proceedings.
Given the unique nature of these Chapter 11 cases, where millions of claims are based on digital assets, the debtors propose a Digital Assets Conversion Table to streamline the process and avoid unnecessary delays. This table estimates the value of each digital asset on which claims are based as of the petition date.
The court is expected to have broad discretion in choosing the best-suited method to estimate the valuation of claims based on digital assets, and the debtors used data from Coin Metrics for this purpose.
According to the filing,
“This Court has broad discretion to choose whatever method it deems best-suited to the particular circumstances to estimate the valuation of claims based on digital assets. Courts consider all factors and circumstances surrounding the claims but do not seek to estimate claims with mathematical precision.”
The proposed plan for calculating claims involves converting the value of digital assets into cash as of the petition date using the rates set forth in the Digital Assets Conversion Table and making distributions in cash. The motion emphasizes the impracticality of liquidating individual claims for each digital asset and underscores that the value of these claims is derived from the underlying digital assets.
Parties involved in the bankruptcy case have until January 11 to file objections, and a hearing on the matter is scheduled for January 25. The motion granting an order to estimate creditor claims based on the proposed pricing is pending approval by the court.
FTX Users Express Concerns and Criticism Over Proposed Valuation Plan, Some Labeling It a ‘Scam’
The proposed plan by FTX debtors to estimate the value of various digital assets based on their prices at the time of the petition date, November 11, 2022, has faced criticism from FTX users. Some users described the plan as a “scam” and expressed frustration at the extended duration of the case, suggesting accepting the offered terms to avoid further uncertainty and legal costs.
FTX has incurred significant legal fees, with over $118 million billed between August and October for professional legal fees. The latest expense comes to about $53,000 per hour and over $1.3 million per day on average, according to court filings.
Sunil Kavuri, a prominent creditor of the bankrupt firm, criticized the motion, stating that it grossly undervalued the digital assets’ worth and encouraged customers to “fight” against the proposed plan.
The FTX 2.0 Coalition, representing FTX creditors, has encouraged customers who wish to object to the proposed estimation of digital asset values to write a letter directly to the judge overseeing the bankruptcy case. They highlighted that customers can send a signed letter to the Delaware bankruptcy court without the need for legal representation.
Simon Dixon, the CEO of BnkToTheFuture, has also supported the idea of opposing the proposed valuations, urging FTX customers to take an active stance against the plan.
Customers of the defunct crypto exchange have been unable to access their funds since November 2022. Some have opted to sell their claims to third parties for less than their total value.
If the court approves the plan, crypto holders may miss out on gains from certain tokens, considering the significant price increases in Bitcoin and Ethereum since FTX’s collapse in November 2022. Bitcoin has surged more than 150%, reaching $42,452 at the time of publication, while Ethereum has seen an increase of over 87%, rising from $1,258 to $2,354.
