In recent developments surrounding the collapse of FTX, a wave of indignation has swept through its creditor community as it has been revealed that compensation for claimants is being calculated based on the value of cryptocurrencies at the time of FTX’s bankruptcy in November 2022.
Background
FTX’s meltdown began in November 2022, triggered by revelations regarding its affiliate Alameda Research and its entangled holdings in FTX’s native token. As the withdrawal surge intensified, FTX suspended redemptions and filed for bankruptcy on November 11, 2022.
In the ensuing bankruptcy proceedings, the assets of FTX’s customers were converted into U.S. dollars as of that bankruptcy date — meaning creditors received payments based on the crypto-asset value on November 11, 2022, not on what those assets might be worth today.
Why Creditors Are Furious
The root of the anger lies in the fact that major cryptocurrencies like Bitcoin and Solana have surged significantly since late 2022. Creditors who held those coins, had they been paid in the tokens themselves today or calculated based on current values, would be positioned much better. However, because payouts were pegged to the old price snapshot, many feel they have lost out on a substantial rebound.
Blockchain investigator ZachXBT publicly criticized former CEO Sam Bankman‑Fried, alleging misrepresentation in FTX’s recovery communications and pointing out that the “value capture” of the bounce in crypto prices post-2022 appears to benefit the estate or other stakeholders, not necessarily the customers.
The Mechanics of the Payout
According to the bankruptcy trustee’s disclosures:
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All customer assets held by FTX were converted into USD as of November 11, 2022.
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Creditors have reportedly received payments equivalent to approximately 119% to 143% of their claims based on that date’s valuation.
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The estate still retains assets worth billions of dollars (including cash, investments, and real-estate) to be distributed.
While on paper some creditors have received more than their claim basis (i.e., above 100%), the key complaint is that the valuation reference point is now seen as antiquated and unfair given the subsequent market upside.
Wider Implications
This situation has broader ramifications for the crypto industry and bankruptcy norms:
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It challenges expectations among users of crypto platforms that their holdings will be returned in kind (i.e., tokens) rather than converted and cashed out at a past price.
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It raises questions about transparency and fairness in the handling of customer claims, especially when asset values are volatile.
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From a regulatory-and-legal perspective, it highlights how bankruptcy procedures may lag behind rapidly evolving asset classes like crypto.
What’s Next?
For creditors and the wider community, the next steps may include:
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Monitoring the remaining asset distributions from the FTX estate to see whether further payments will reflect updated valuations or remain pegged to the 2022 snapshot.
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Legal scrutiny: Some creditors may explore whether the payout method could form the basis for claims of unfair practice or mis-representation.
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Industry lessons: Other crypto platforms may adjust how they handle insolvency, asset conversion, and client protections in the future.
Conclusion
The FTX case underscores the unique risks tied to crypto asset volatility and the intersection with insolvency frameworks. While some creditors have been paid back on paper, the benchmark of November 2022 valuations has left many feeling short-changed in light of the subsequent crypto rally. Whether this becomes a cautionary tale that reshapes how crypto platform collapses are handled remains to be seen.
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