A gaggle of collectors of the bankrupt crypto exchange FTX filed an adversary lawsuit in response to the proposed payout plans, looking for to ascertain that deposits are their property relatively than FTX’s.

The proposed plan of the defunct alternate would see collectors repaid based mostly on November 2022 costs of digital assets, that are considerably decrease than their present values. As an illustration, Bitcoin, presently valued at $43,250, was value solely $16,800 in November 2022.

Collectors Demand ‘Fair Valuation’ Of Digital Property

Of their filing, the collectors spotlight the necessity for a centralized strategy to worth the tens of millions of unliquidated claims based mostly on digital belongings within the Chapter 11 Instances. They argue {that a} “fair and compliant valuation” is important for plan solicitation, voting, setting reserves, and making distributions.

Many of the worth of claims towards FTX is predicated on US dollar-denominated fiat and stablecoins. On the identical time, a good portion consists of different belongings that aren’t simply transformed to US {dollars}.

To deal with this, FTX proposes dollarizing the values of claims based mostly on digital belongings apart from fiat and stablecoins. They depend on a Digital Assets Conversion Table, based mostly on Coin Metrics pricing, to estimate the claims’ values.

FTX believes that valuation based mostly on the petition time pricing for digital belongings is required beneath the Chapter Code and affords the “most equitable approach.”

Nevertheless, the collectors’ objections mirror various opinions on tips on how to worth these claims, with every objector advocating for his or her pursuits. In distinction, FTX, as a fiduciary for the estates as an entire, seeks a strategy that complies with the Chapter Code and treats collectors “fairly.”

FTX Defends Digital Asset Valuation Methodology

The proposed order permits the courtroom to judge claims based mostly on digital belongings earlier than finalizing the disclosure statement and commencing the plan’s solicitation and voting.

Sure objections in regards to the valuation of particular digital belongings, comparable to MAPS, OXY, and SRM, require additional discovery and will probably be thought of in a future evidentiary listening to in March 2024.

FTX acknowledges that estimation is acceptable for claims based mostly on digital belongings and asserts that the values offered within the Digital Property Conversion Desk are truthful and appropriate.

Furthermore, the alternate additional argues that valuing belongings as of the petition date is important to acknowledge a volatile market and stop declare values from fluctuating post-petition.

The bankrupt alternate’s authorized staff contends that treating some digital belongings otherwise based mostly on post-petition appreciation or depreciation would lead to disparate remedy, violating the Chapter Code and being inequitable for collectors.

Regardless of complaints from collectors relating to the numerous value adjustments for the reason that petition date, Bitcoinist reported that FTX maintains that chapter legislation requires digital asset reimbursement costs to be decided based mostly on the submitting date for chapter in November 2022.

Because the authorized battle unfolds, the courtroom’s choice on the valuation of digital belongings and the lawsuit’s decision could have important implications for FTX’s collectors and the broader crypto neighborhood.