Man, the fallout from FTX's collapse just keeps getting messier. So, apparently, there's this huge headache for creditors over how crypto assets were valued when the company filed for bankruptcy. And let me tell you, it's a wild ride through the world of crypto bankruptcies.
The Wild West of Crypto Bankruptcies
First off, can we talk about how different these crypto bankruptcies are compared to your run-of-the-mill financial insolvencies? I mean, traditional systems have their hiccups, but throw in decentralized and super volatile assets like Bitcoin and Ethereum? It's chaos. And let's be real—most traditional financial institutions are looking at crypto firms like "What even are you?"
So here’s the kicker: bankruptcy courts are stepping in like some sort of makeshift regulators. They're trying to manage everything from customer protection to reporting details that would make any normal court blush. But here's the problem—their main job isn't to stop future disasters; it's to figure out what happens to the debtor.
Timing is Everything... Literally
Now onto the juicy part: asset valuation timing. You see, when FTX filed for bankruptcy on November 11, 2022, Bitcoin was sitting at around $16k. Fast forward to today? It’s over $65k! That’s a massive difference if you're a creditor hoping to get paid back.
And it gets crazier. The court decided that certain tokens should get a 100% discount because they were basically worthless in terms of liquidity or marketability—looking at you MAPS and OXY tokens! So if you're holding those as collateral? Good luck with that.
Court Methodologies Are No Joke
The methodologies being used for these valuations are something else too. They’re called the Blockage Method and Ghaidarov Model—sounds fancy, right? But essentially they’re saying “Hey big block of assets might move markets down so let’s value them cheaper.”
And yeah, creditors are pissed. A recent tweet from an FTX creditor activist laid it all out: they’re expecting only 10-25% recovery on their losses!
Preferred Shareholders Get a Sweet Deal
Oh and don’t forget about those preferred shareholders! Apparently 18% of funds seized by the US Department of Justice are going into some special “Preferred Shareholder Relief Fund.” It’s capped at $230 million but still—those folks got extra lucky.
So what does this all mean for us regular folks navigating this crazy fintech landscape? Well if there’s one takeaway it’s this: better have your ducks in a row cause one misstep could land you in an FTX-like situation real quick!
