- FTX’s proposed compensation plan for defrauded customers has come under fire from creditor activist Sunil Kavuri, who claims it severely undervalues customer claims.
- The plan could potentially result in FTX customers losing over $10 billion.
- Kavuri has highlighted concerning clauses in the plan, including one that shields the firm from lawsuits and another that could lead to claim forfeitures.
FTX’s proposed compensation plan for defrauded customers is under scrutiny, with creditor activist Sunil Kavuri claiming it undervalues customer claims and could result in losses of over $10 billion. The plan also includes concerning clauses that could shield the firm from lawsuits and lead to claim forfeitures.
Kavuri Criticizes FTX’s Compensation Plan
FTX’s proposed plan to compensate the defrauded customers of the fallen crypto exchange has been met with strong opposition from creditor activist Sunil Kavuri. Kavuri has voiced his concerns publicly, encouraging a collective “NO” vote against the plan. He warns that FTX creditors stand to lose over $10 billion should the proposed plan pass.
Undervaluing of Customer Claims
Kavuri has highlighted that the proposed repayment structure severely undervalues the claims of FTX customers. The plan suggests paying out claims with an 18% return for those under $50,000 and a staggered 25% to 47% for claims over $50,000. This undervaluation arises because FTX is seeking to pay defrauded customers the monetary value of their assets as of the bankruptcy filing rather than the actual crypto assets. For instance, Bitcoin traded around $16K when FTX went bankrupt in November 2022 but has since reached $73,750 in 2024.
Exculpation Clause and Potential Claim Forfeitures
Furthermore, Kavuri has pointed out concerning clauses in the plan. One such clause is an exculpation clause that would effectively shield the firm and other parties from lawsuits related to misconduct. This clause seeks to absolve key players from legal responsibility that may arise from the plan. Another clause could lead to the forfeiture of claims if the issued checks are not cashed within a six-month window. This stipulation could disenfranchise creditors who may not cash their checks promptly.
Conclusion
In conclusion, Kavuri asserts that each defendant should be held liable for the full current value of FTX customers’ losses rather than the reduced figures proposed in the plan. Some commentators have suggested that voting against this plan may cost creditors an additional two years of waiting before getting their funds. The controversy surrounding FTX’s proposed compensation plan underscores the importance of transparency and fairness in the crypto industry, especially when dealing with customer claims.
