Debtors of now-defunct cryptocurrency exchange FTX have filed a modified Chapter 11 reorganization plan, suggesting that clients' asset claims should be valued retroactively to the date of the exchange's collapse in November last year.
In a recent court presentation In the United States Bankruptcy Court for the District of Delaware, the debtors proposed that any claim by a customer seeking compensation from the exchange should be based on the value of the asset as of November 11, 2022.
Under the plan, the value of each claim will be determined by converting crypto assets into cash using conversion rates specified in a conversion table.
Cryptocurrency prices have increased significantly since the bankruptcy filing.
Bitcoin, for example, was valued at $17,036 during the filing, but has since risen to $42,272 at press time.
In a separate development, FTX received approval on November 30 for sell about $873 million value of the trust assets, with the intention of using the proceeds to pay creditors of the collapsed exchange.
Additionally, on December 7, the FTX 2.0 Ad Hoc Client Committee proposed to review the reorganization plan to ensure a fair balance between the interests of stakeholders.
Meanwhile, there has been increasing scrutiny over the crypto asset activities associated with both FTX and Alameda Research.
On December 9, reports emerged that wallets linked to these defunct entities had transferred digital assets worth $23.59 million to multiple cryptocurrency exchanges.
Bankman-Fried faces 115 years in prison
Last month, the founder of FTX Sam Bankman-Frito was found guilty by a jury of defrauding customers and lenders.
A tentative sentencing date has been set for March 28, 2024, and legal experts suggest a possible prison sentence of 15 to 20 years, despite a theoretical maximum of 115 years.
Meanwhile, Carolina EllisonCEO of Alameda Research, Gary Wangco-founder of FTX, and Nishad SinghFTX engineering chief, will likely receive little or no prison time for their cooperation, according to Legal Experts.
All three admitted to engaging in fraudulent activity under the direction of Bankman-Fried, which involved the transfer of billions of dollars in FTX client funds to Alameda, a hedge fund majority owned by Bankman-Fried.
However, they may still face other consequences. The government could demand the return of ill-gotten gains and order restitution payments to victims.
Given the government's claim that FTX customers suffered billions in losses, the financial burden on the three witnesses could be substantial.
More recently, FTX debtors raised concerns about the Internal Revenue Service's (IRS) claim for $24 billion in taxes, warning that it could prevent the return of customer funds.
As reportedThe debtors argued that their profits were nowhere near the amount claimed by the IRS and instead they incurred substantial losses.
"These cases present a zero-sum game," said lawyers representing the bankrupt exchange.
โThe only source of recovery for the IRS is to take recovery away from victims. As there is no basis to assert any tax claims against the Debtors, the IRS's reliance on its own processes only serves to delay distributions to those truly harmed.โ
