A group of former customers of bankrupt crypto exchange FTX are challenging a proposed plan that would return their lost funds. They argue that the plan does not fully reflect the extent of the firm’s obligation to customers, especially considering the increase in the price of cryptocurrencies since the bankruptcy. The customers have filed a lawsuit seeking fair recovery, stating that this issue should have been resolved a long time ago.
FTX collapsed in November 2022 after failing to meet a surge in withdrawal requests, resulting in billions of dollars’ worth of customer money going missing. A year later, FTX founder Sam Bankman-Fried was convicted of fraud and conspiracy charges related to the exchange’s downfall. The messy bankruptcy has created uncertainty about the amount of money that will be returned to customers, with bankruptcy claims being traded on the secondary market experiencing significant price fluctuations.
During a recent hearing, a lawyer representing FTX stated that the company expects to have sufficient funds to pay all allowed customer and creditor claims in full. However, this has not been guaranteed, and some FTX customers are dissatisfied with the way their claims have been valued under the proposed plan. Many customers held crypto assets like bitcoin on the platform, but their claims have been assigned a dollar value based on the price of those assets on the date of the bankruptcy, through a process called dollarization.
The disgruntled customers argue that this method does not account for the significant increase in the value of cryptocurrencies since the bankruptcy. They believe they are entitled to a larger recovery and have filed a lawsuit to challenge the valuation of their claims. The outcome of this legal battle will determine whether these customers receive the full amount of their lost funds or if they will only be partially compensated.
