Victims of the FTX collapse have petitioned a New York court to declare that the crypto exchange’s forfeited assets, valued at around $8 billion, should be returned to its customers rather than becoming part of the bankruptcy estate. This request highlights the ongoing struggle between the exchange’s users and the bankruptcy proceedings over the rightful ownership of these assets.
- Priority of Creditors: According to the bankruptcy code, certain creditors are prioritized over others, placing holders of FTX’s FTT token near the bottom of the list. This has significant implications for the distribution of assets, as it is unlikely that these token holders will receive compensation from the estate.
- Reorganization Plan Controversy: Last month, the estate proposed a reorganization plan that would reimburse 98% of creditors 118% of their claims in cash within 60 days of court approval. However, this plan has angered many FTX customers who missed out on potential profits due to the prolonged bankruptcy proceedings, especially given the significant rise in cryptocurrency prices since the filing.
- Customer Grievances and Legal Arguments: Lawyers Adam Moskowitz and David Boies, representing the victims, argue that the bankruptcy process has left FTX customers feeling cheated. They claim that the process is perceived as a continuation of the fraud perpetrated by former CEO Sam Bankman-Fried (SBF), who was convicted of stealing no less than $8 billion from customers. The lawyers contend that if not for SBF’s criminal actions, customers would still own their crypto investments to
In summary, the battle over FTX’s forfeited assets continues as customers seek judicial recognition of their claims over the bankruptcy estate. The controversy surrounding the prioritization of creditors and the reorganization plan underscores the complex legal and financial challenges in the aftermath of FTX’s collapse. As the case progresses, the outcome will set a significant precedent for future cryptocurrency bankruptcy cases and the protection of customer assets.
