FTX, the once-$32 billion crypto exchange, faces a bankruptcy saga with unprecedented challenges. Bankruptcy lawyers are advocating for a repayment plan, calculating customer holdings at the value as of November 11, 2022, the date when FTX sought bankruptcy protection.
Bitcoin price at the time was $16,871, but currently stands at a staggering $42,154, complicating the proposed FTX repayment plan. Despite customer objections, a recent Delaware court ruling has granted Judge John Dorsey broad discretion in determining methods for calculating bankruptcy claims, emphasizing the use of the petition date for asset valuation.
FTX executives, including Sam Bankman-Fried and others, have been found guilty of federal crimes, involving the improper diversion of customer deposits and funds for personal gains. The proprietary trading company controlled by these executives, Alameda Research, owed billions to FTX when the company filed for bankruptcy.
The scale of the bankruptcy claims is mind-boggling, surpassing $2 quintillion. Millions of customers and numerous corporate counterparts face severe losses, as FTX plummeted from a $32 billion valuation to a mere $0.
Despite this financial abyss, FTX’s bankruptcy attorneys are banking on a risky “pay-in-full plan.” This plan assumes that U.S. regulators, such as the IRS and SEC, will prioritize repaying regular customers over imposing multi-billion dollar fines on FTX. However, the IRS alone demands $24 billion from the estate, raising doubts about the feasibility of such assumptions.