Fallen crypto exchange FTX has been searching behind the sofa
for change and has, perhaps miraculously, found the funds to pay its creditors.
But will they accept they deal? And is it fair?
Once a towering titan in the cryptocurrency world, FTX has
tumbled from its lofty heights into the dismal depths of bankruptcy. This isn’t
just your everyday corporate collapse; it’s a spectacular financial faceplant
that's left creditors clamoring for billions. Grab your popcorn, because this
chaos is crypto in its wildest form.
The Fall from Crypto Grace
FTX, once known for its ambitions in the blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe
Read this Term arena, was
seemingly on top of the digital world. With a valuation that soared into the
billions, FTX wasn't just playing the crypto game; they were poised to redefine
it. But alas, in late 2022, the empire built on blockchain dreams and digital
derring-do began to crumble spectacularly. Accusations of misusing customer
funds and risky financial practices turned crypto kingpin Sam Bankman-Fried’s
playground into a perilous pit of regulatory scrutiny and public scandal. Read
all about it here.
Billions in the Balance
As part of the plan to recover whatever can be recovered, the
government - the Internal Revenue Service and the Commodities and Futures
Trading Commission to name two agencies - has agreed to suspend high-value
claims against FTX until creditors have been repaid. However, the IRS will
receive $200 million upfront before anyone else gets a slice. There’s a surprise.
And so here we are. After the dust settled (or rather, the coins
stopped clinking), FTX found itself staring at debts owed to customers and
non-governmental creditors of around $11 billion. Yes,
that's billion with a "B", and yes, those creditors are as happy
about this as a cat in a bathtub.
However… It turns out that, once it’s sold all its assets, the
company might have as much as US$16.3 billion in cash to
distribute, according to documents filed with the federal court in Wilmington,
Delaware, where the FTX case is being handled.
The Creditor Conundrum
Welcome to the Twitter account for the Official Committee of Unsecured Creditors (UCC) appointed in the @FTX_Official bankruptcy cases. You can learn more about the UCC in the below thread or on our official website (https://t.co/5o2kaNR3z3).
— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) February 6, 2023
Among the jilted parties are a wild mix of hedge funds, venture
capitalists, and Joe Schmoes—all united by their shared misfortune of trusting
FTX with their digital dollars. Now, they stand in a snaking queue, hoping to
salvage whatever scraps they can from the bankruptcy
Bankruptcy
Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co
Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co
Read this Term bonfire.
But, there’s an issue… Depending on the type of claim a creditor
holds, some could recover as much as 142 per cent of what they are owed. Though
118 per cent somehow seems more likely. But, although all debts will be paid in
full, nothing will be leftover for equity holders.
Rejection, Resentment, and Repercussions
Adding insult to insolvency, some creditors are scoffing at the
idea of accepting payouts. In January, a block of creditors began to form, and
it now sits over 1,600 members.
This block intends to vote in June as to whether it’ll accept
118 percent of their lost funds. “The recovery percentages are drawn from a
fake baseline. It’s a false narrative,” said Arush Sehgal, one of the block
leaders, in an interview with Wired. “It’s an insult to creditors,” he said.
But
what’s the issue? Why’s it an insult?
Sehgal et al don’t like the way their claims have been valued.
Many of the customers held crypto on FTX. But, because bankruptcy proceedings
are all dollar-based, they believe that their holdings have been assigned an
incorrect, low, dollar value. There’s an ongoing lawsuit, and they’re not happy
campers. You can download the filing here.
FTX creditors will get OVER 100% of their money back, but @LouisOrigny (co-founder of @ftxcreditor_com) & I discuss why this is a deceptive statement & break down the pros/cons of FTX's new plan. A LOT of customers are getting screwed (feat. @arush). pic.twitter.com/cvOekwUpQL
— Tiffany Fong (@TiffanyFong_) May 10, 2024
Titanic Problems
What's left for FTX now? Well, it’s akin to rearranging deck
chairs on the Titanic. As they navigate through bankruptcy, every move is
scrutinized by disillusioned investors and a cynical public. As a company,
they’re no doubt done. Their reputation gone. But, there’s the small issue of
making sure that everyone gets what they deserve … the question is, who
deserves what and who sets the value?
As we watch the continuing chaos, we’d do well to remember that
all of this is relatively new and whatever happens could well end up being a
precedent in future legal hearings. Interesting times. One thing remains as
clear as ever, though: Caveat emptor!
For more humorless takes on finance and finance-adjacent news,
follow our Trending section.
Fallen crypto exchange FTX has been searching behind the sofa
for change and has, perhaps miraculously, found the funds to pay its creditors.
But will they accept they deal? And is it fair?
Once a towering titan in the cryptocurrency world, FTX has
tumbled from its lofty heights into the dismal depths of bankruptcy. This isn’t
just your everyday corporate collapse; it’s a spectacular financial faceplant
that's left creditors clamoring for billions. Grab your popcorn, because this
chaos is crypto in its wildest form.
The Fall from Crypto Grace
FTX, once known for its ambitions in the blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe
Read this Term arena, was
seemingly on top of the digital world. With a valuation that soared into the
billions, FTX wasn't just playing the crypto game; they were poised to redefine
it. But alas, in late 2022, the empire built on blockchain dreams and digital
derring-do began to crumble spectacularly. Accusations of misusing customer
funds and risky financial practices turned crypto kingpin Sam Bankman-Fried’s
playground into a perilous pit of regulatory scrutiny and public scandal. Read
all about it here.
Billions in the Balance
As part of the plan to recover whatever can be recovered, the
government - the Internal Revenue Service and the Commodities and Futures
Trading Commission to name two agencies - has agreed to suspend high-value
claims against FTX until creditors have been repaid. However, the IRS will
receive $200 million upfront before anyone else gets a slice. There’s a surprise.
And so here we are. After the dust settled (or rather, the coins
stopped clinking), FTX found itself staring at debts owed to customers and
non-governmental creditors of around $11 billion. Yes,
that's billion with a "B", and yes, those creditors are as happy
about this as a cat in a bathtub.
However… It turns out that, once it’s sold all its assets, the
company might have as much as US$16.3 billion in cash to
distribute, according to documents filed with the federal court in Wilmington,
Delaware, where the FTX case is being handled.
The Creditor Conundrum
Welcome to the Twitter account for the Official Committee of Unsecured Creditors (UCC) appointed in the @FTX_Official bankruptcy cases. You can learn more about the UCC in the below thread or on our official website (https://t.co/5o2kaNR3z3).
— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) February 6, 2023
Among the jilted parties are a wild mix of hedge funds, venture
capitalists, and Joe Schmoes—all united by their shared misfortune of trusting
FTX with their digital dollars. Now, they stand in a snaking queue, hoping to
salvage whatever scraps they can from the bankruptcy
Bankruptcy
Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co
Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co
Read this Term bonfire.
But, there’s an issue… Depending on the type of claim a creditor
holds, some could recover as much as 142 per cent of what they are owed. Though
118 per cent somehow seems more likely. But, although all debts will be paid in
full, nothing will be leftover for equity holders.
Rejection, Resentment, and Repercussions
Adding insult to insolvency, some creditors are scoffing at the
idea of accepting payouts. In January, a block of creditors began to form, and
it now sits over 1,600 members.
This block intends to vote in June as to whether it’ll accept
118 percent of their lost funds. “The recovery percentages are drawn from a
fake baseline. It’s a false narrative,” said Arush Sehgal, one of the block
leaders, in an interview with Wired. “It’s an insult to creditors,” he said.
But
what’s the issue? Why’s it an insult?
Sehgal et al don’t like the way their claims have been valued.
Many of the customers held crypto on FTX. But, because bankruptcy proceedings
are all dollar-based, they believe that their holdings have been assigned an
incorrect, low, dollar value. There’s an ongoing lawsuit, and they’re not happy
campers. You can download the filing here.
FTX creditors will get OVER 100% of their money back, but @LouisOrigny (co-founder of @ftxcreditor_com) & I discuss why this is a deceptive statement & break down the pros/cons of FTX's new plan. A LOT of customers are getting screwed (feat. @arush). pic.twitter.com/cvOekwUpQL
— Tiffany Fong (@TiffanyFong_) May 10, 2024
Titanic Problems
What's left for FTX now? Well, it’s akin to rearranging deck
chairs on the Titanic. As they navigate through bankruptcy, every move is
scrutinized by disillusioned investors and a cynical public. As a company,
they’re no doubt done. Their reputation gone. But, there’s the small issue of
making sure that everyone gets what they deserve … the question is, who
deserves what and who sets the value?
As we watch the continuing chaos, we’d do well to remember that
all of this is relatively new and whatever happens could well end up being a
precedent in future legal hearings. Interesting times. One thing remains as
clear as ever, though: Caveat emptor!
For more humorless takes on finance and finance-adjacent news,
follow our Trending section.
