Revised bankruptcy documents shared by FTX creditor Sunil Kavuri have shed light on the grim reality facing some FTX customers, who are set to receive a maximum of only 25% of their original funds. This revelation comes as a harsh blow to those who had placed their trust in FTX, once a popular and second-ranked crypto trading platform in the industry.
The downfall of FTX began in November 2022 when a report by leading crypto media outlet Coindesk exposed serious issues with the exchange’s backend funds. It was revealed that FTX had failed to hold customers’ funds in reserve, instead misusing a significant portion of the funds for personal gain. This revelation sent shockwaves through the crypto community and ultimately led to FTX’s collapse.
On 28 Sep 2024, Sunil Kavuri shared the revised bankruptcy documents, highlighting how the FTX bankruptcy leaders had strategically used the volatility of cryptocurrencies to justify repaying creditors a mere fraction of their original investments. According to Sunil, some creditors are only slated to receive 10%-25% of their cryptocurrencies, based on the prices of cryptocurrencies at the time of the filing, when prices were significantly lower than current levels.
This repayment plan has sparked outrage among creditors and customers alike, with many questioning the fairness and transparency of the process. There is a growing sentiment within the crypto community that FTX’s compensation plan is grossly unjust and may even invite legal challenges in the near future.
Adding to the controversy, the United States Securities and Exchange Commission (SEC) recently raised concerns about creditor repayments being made with stablecoins, hinting at a possible challenge to repayments made with US dollar-pegged crypto assets. This development has only added to the uncertainty surrounding FTX’s future and the fate of its creditors.
In conclusion, FTX’s handling of the bankruptcy proceedings has come under intense scrutiny, with many calling for greater accountability and fairness in the repayment process. As the saga continues to unfold, it remains to be seen how FTX will navigate these challenges and whether it will be able to restore trust and confidence in its operations.