FTX Debtors Propose Valuation of Digital Assets: What You Need to Know

FTX creditors have filed a motion to determine the valuation of claims involving digital assets and fiat currency.

FTX released estimated values for cryptocurrency claims, with Bitcoin priced at $16,871 per coin.

📅 Last updated: December 29, 2023 04:02 EST
⌛ Reading time: 3 min
📷 Source: Adobe / Александр Поташев

FTX Trading Ltd. affiliated debtors have recently filed a motion proposing the valuation of claims related to digital assets and fiat currency. This move has sparked both concerns and criticism from FTX users, with some labeling it a “scam.” Let’s dive into the details and explore what this means for the future of FTX and its customers.

Estimating the Value of Digital Assets

The proposed valuation plan by FTX debtors aims to estimate the value of various digital assets based on their prices at the time of FTX’s bankruptcy filing on November 11, 2022. According to the filing, the proposed values include:

• Bitcoin at $16,871
• Ethereum at $1,258
• Solana (SOL) at $16
• Avalanche (AVAX) at $14.19

Additionally, the proposal includes stablecoins like USDT, TUSD, and BUSD at values slightly less than their usual $1 peg. Notably, the estimated valuation plan excludes FTX Token (FTT) prices but includes prices for leveraged tokens, tokenized stocks, spot derivatives, and crypto futures.

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A “Fair and Reasonable” Valuation?

The debtors argue that their valuations represent a “fair and reasonable” value of these digital assets as of the specified petition date. However, the court needs to review and approve these valuations as part of FTX’s bankruptcy proceedings. The court is expected to have broad discretion in choosing the best-suited method for estimating the valuation of claims based on digital assets.

Streamlining the Process with a Digital Assets Conversion Table

Given the unique nature of these Chapter 11 cases, where millions of claims are based on digital assets, the debtors propose a Digital Assets Conversion Table to streamline the process and avoid unnecessary delays. This table estimates the value of each digital asset on which claims are based as of the petition date. The debtors used data from Coin Metrics for this purpose.

Concerns and Criticism from FTX Users

The proposed valuation plan has faced criticism from FTX users. Some have labeled it a “scam” and expressed frustration at the extended duration of the case. FTX has incurred significant legal fees, with over $118 million billed between August and October for professional legal services. This has led some users to suggest accepting the offered terms to avoid further uncertainty and legal costs.

However, prominent creditor Sunil Kavuri criticized the motion, stating that it grossly undervalued the digital assets’ worth and encouraged customers to “fight” against the proposed plan. The FTX 2.0 Coalition, representing FTX creditors, has also encouraged customers to write a letter directly to the judge overseeing the bankruptcy case if they wish to object to the proposed estimation of digital asset values. Customers can send a signed letter to the Delaware bankruptcy court without the need for legal representation.

Missing Out on Potential Gains

If the court approves the proposed plan, crypto holders may miss out on gains from certain tokens. Since FTX’s collapse in November 2022, Bitcoin has surged more than 150%, reaching $42,452 at the time of publication, while Ethereum has seen an increase of over 87%, rising from $1,258 to $2,354.

It is important for FTX customers to stay informed, voice their concerns, and actively participate in the ongoing bankruptcy proceedings to protect their interests.

🏆 Expert Analysis and Future Outlook

The valuation of digital assets in bankruptcy cases poses unique challenges. Courts need to strike a balance between ensuring a fair distribution of assets among creditors and considering the volatility and potential future price movements of digital assets. The court’s decision regarding the valuation method employed will have a significant impact on the final outcome for FTX users.

Looking towards the future, regulatory frameworks and guidelines for valuing and distributing digital assets in bankruptcy cases will likely emerge. These frameworks will provide more clarity and fairness for all parties involved. As the crypto market continues to grow and mature, it is crucial to establish robust mechanisms that address the complexities of digital asset valuation in bankruptcy proceedings.

In terms of investment recommendations, it is essential for individuals to carefully assess their exposure to cryptocurrency exchanges and consider diversifying their holdings across multiple platforms to mitigate potential risks. Additionally, staying informed and actively participating in decision-making processes, such as voicing concerns and objections, can help protect one’s interests as a cryptocurrency holder.

📚 References

1. FTX Debtors Propose Crypto Claims Valuation
2. FTX Users Express Concerns and Criticism Over Proposed Valuation Plan
3. FTX Legal Fees and Extended Duration of the Case
4. Prominent Creditor’s Criticism of the Proposed Plan
5. FTX 2.0 Coalition’s Call to Action
6. Importance of Staying Informed and Actively Participating

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👋 What are your thoughts on FTX’s proposed valuation plan? Do you believe it adequately represents the value of digital assets? Share your opinions and join the discussion below! Don’t forget to share this article with your fellow crypto enthusiasts on social media. Let’s spread the knowledge together!

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