FTX Creditor Wants Debt Repayment In Crypto Instead of USD

In a pathbreaking decision, bankrupt crypto exchange FTX announced that it would repay all of its creditors and customers with interest while disclosing its proposed distribution plan in a latest document. While many in the crypto community appreciated this development, FTX creditors aren’t much happy about this.

FTX Creditor Representative Rejects Compensation Plan

Sunil Kavuri, the FTX creditor representative, opposed the proposed compensation plan. He advocated for debts to be settled in cryptocurrency rather than their dollar equivalent at the point of bankruptcy.

In a recent development, Sunil, a key figure in the ongoing FTX saga, urged stakeholders to vote against the proposed plan. Sunil’s stance highlights several critical concerns surrounding the current situation:

• Sullivan and Cromwell – S&C/Debtors are indebted to FTX customers for the current value of their holdings, which stands at 3 to 10 times the petition prices.
• It’s alleged that S&C has caused substantial damage, estimated to exceed $10 billion, to FTX creditors.
• SBF, the founder of FTX, reportedly faced a 25-year sentence for violating terms of service (TOS) and allegedly misappropriating customer deposits.
• S&C is implicated in ongoing class-action lawsuits, accused of aiding and abetting SBF’s fraudulent activities.

Sunil emphasized that each defendant should be held accountable for the losses incurred by FTX customers, equivalent to the current value of their holdings.

Benefitting From the Crypto Market Rally

FTX filed for bankruptcy during November 2022, when the crypto winter was at its peak. However, in 2023, the crypto market bounced back significantly, and so did the value of cryptocurrencies held by the exchange.

FTX announced its plan to allocate the additional billions in cash reserves towards paying interest to its 2 million customers, a relatively uncommon outcome compared to typical bankruptcy settlements where creditors often receive minimal compensation.

Upon liquidating all assets, the exchange anticipates having approximately $16.3 billion in cash reserves for distribution, according to a company statement. The outstanding debts, amounting to roughly $11 billion, are owed to customers and other non-governmental creditors.