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FTX Proposes Estimated Values for Crypto Assets in Bankruptcy Filing

FTX Trading Ltd. affiliated debtors took a step towards figuring out how to compensate customers by filing a motion to estimate the value of cryptocurrency and fiat currency claims as of November 11, 2022, when the company filed for Chapter 11 bankruptcy protection.

Key Takeaways

  • FTX has filed a motion in bankruptcy court to estimate the value of over 500 digital assets owed to creditors as of November 11, the petition date.
  • The proposed crypto asset values include Bitcoin at $16,871, Ethereum at $1,258, and other major crypto assets.
  • FTX Token (FTT) value was not estimated but values for leveraged tokens, tokenized stocks and crypto derivatives were included.
  • Customers and creditors have criticized the valuation plan for undervaluing assets and lacking transparency.

The debtors claim their estimated values are “fair and reasonable” and are seeking court approval of the plan. However, some creditors and customers have expressed concerns that the estimations do not accurately reflect the fair value of crypto assets, which have appreciated significantly since the November 11 filing date. Objections to the motion are due by January 11.

How FTX Proposes to Estimate Claim Values

FTX has proposed a “Digital Assets Conversion Table” to serve as the basis for estimating the value of claims in U.S. dollars. According to the motion, claims would be converted into cash using the rates in the Table as of November 11, 2022.

The bankruptcy court has broad discretion to determine how it estimates the value of claims for purposes of voting on a bankruptcy plan. While the proposed values may give a starting point for negotiations, the court is not bound by them and will likely consider any objections raised.

The uncertainty surrounding claim values and the drawn out bankruptcy process has frustrated many FTX customers. As one Twitter user said, “They are basically trying to scam their investors by valuing everything at an arbitrary date that favors their numbers.”

Criticisms of the Proposed Plan

Many creditors and customers have pushed back against FTX’s proposed plan. In particular, critics argue:

  • The proposed values undervalue crypto assets given the significant appreciation since November 11.
  • The lengthy bankruptcy process leaves claim values uncertain for months.
  • There is a lack of transparency around how the specific values in the Conversion Table were determined.One claimant called it a “scam.”

Sunil Kavuri, a creditor, and the FTX 2.0 Coalition have voiced opposition to the plan, arguing for crypto claims to be valued at or near current market prices.

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