FTX customers are pushing back against the exchange’s proposed bankruptcy plan, claiming that it infringes on their property rights and utilizes their assets to pay off third-party creditors, including the U.S. government. A representative of these customers expressed their desire to have their cryptocurrency returned to them instead of receiving a cash balance, stating that they never handed their coins over to FTX. The objection to the plan is being led by the FTX Customers Ad Hoc Committee, which was established to represent the interests of the customers in the bankruptcy case.
In a recent interview, Sunil Kavuri, a member of the committee, argued that the bankruptcy plan breaches the property rights of the creditors. He pointed out that FTX customers differ from crypto lending firm Celsius, as the terms of service for Celsius customers required them to transfer the title to their crypto, while FTX customers never did this. Kavuri also alleged that FTX is attempting to sell customer assets to repay its creditors, including the U.S. government, and using customer funds to pay back lenders like Genesis and Binance.
Kavuri’s views oppose those of the FTX estate, which claimed that the plan would allow customers to receive everything they are owed if approved. However, Kavuri disputed this, stating that customers should receive their property, the cryptocurrency itself, instead of cash, and argued that the exchange does not have the legal basis to pay customers using cash.
He and other customers filed a motion to halt the bankruptcy plan and have the court reject the plan’s disclosure statement, which is set to be approved on June 25. If the disclosure statement is rejected, the current version of the plan will also be dismissed.
The plan is set to undergo a vote by Aug. 16 at 8:00 pm UTC, but some customers have expressed support for it, claiming that it would enable them to quickly recover at least some of their funds. This has sparked a debate among FTX customers over their property rights and the overall approval of the plan.
The FTX bankruptcy case is also riddled with additional issues, including a lawsuit against the firm’s legal representatives, Sullivan & Cromwell, and a dispute over assets seized by former CEO Sam Bankman-Fried during his criminal trial.
The collapse of FTX remains one of the most notable crypto exchange collapses to date, resulting in the loss of an estimated $8 billion in cryptocurrency and the conviction of Bankman-Fried for fraud, who received a 25-year prison sentence for his involvement in the exchange’s bankruptcy.