FTX's bankruptcy plan would pay back customers with interest – but at bear market valuation

The headline is that the FTX state is proposing a plan that will recoup lost funds for nearly all creditors to the massive crypto bankruptcy. Now that that sounds like good news, right? But many people owed money by FTX are actually not happy. One of them is probably named Tom Brady. Joining us now is CB CS Mackenzie. Segalos Mackenzie. All right, a bankruptcy, all the money and more is going to be recovered. Why aren’t Why are people unhappy? So Brian, the main problem here is that the bankruptcy estate froze the value of customer crypto assets back in November of 2022. So we’re talking about the bottom of the bear market. Bitcoin was trading at around $17,000. It’s up to 170% since then, which means that even though 98% of customers are apparently getting their money back plus interest, they’re getting a fraction of what their tokens are actually worth at market prices today. I mean, like, if you do the math, Bitcoin was trading at 17,043 dollars on the day that FTX filed for bankruptcy. If you own just one Bitcoin that day under this proposed bankruptcy plan, you’d get 118% of that back. That’s 20K. And today Bitcoin’s trading at 62,000. That’s a big difference. So there, so there I get it. So basically the, the customers, the money’s been frozen to a point where they didn’t capture that upside. By the way, they’d probably be happy if that was the case if if Bitcoin went down. But that said, why aren’t they capturing that upside if they own tokens? I I have a Why doesn’t that just follow the path of Bitcoin? Yeah. So it, you know, it is important to note here that it actually is extremely rare to see creditors get more than pennies on the dollar in US bankruptcy proceedings. So it’s no small feat that the bankruptcy estate doubled the amount of money that Sam was convicted of stealing from customers. We’re talking about $16 billion that they put together. But to your question, why aren’t they getting more of this upside? I mean, FTX had an enormous stake in Solana, a token that’s up 600% in the last year. It’s got more than $1.1 billion of that token. And and I think that it really goes to the point that this is a lot of accounting confusion at the beginning. John Ray’s team spent six months trying to figure out how much money was missing, and that’s part of it. People don’t know that it was necessarily just $8 billion of customer funds that were stolen. Well, Mac, but I’m you said it’s not just the customers. I’m confused, OK? Because if you’re recovering more money than was theoretically lost in the bankruptcy, the customers aren’t getting it. Who’s getting it? To me, in my mind, somebody’s getting rich off this. If they quote I’m doing air quotes, found a couple billion bucks. Yeah. And one thing I will also say is that there were some very smart venture investments. FTX just exited at stake and anthropic that AI startup, they more than doubled their money. But to to your point, it’s the lawyers and bakers who do tend to make a lot of money. As of January of this year, total legal fees based on the average monthly fee of the of the three law firms involved here was estimated at $260 million. And I can tell you who’s getting absolutely nothing here are the equity shareholders, folks who actually held shares of ownership in the company itself. You mentioned Tom Brady, Steph Curry, Kevin O’Leary, FTX says that they’re not getting a dime. That also includes Sequoia Capital, other like VC funds and the Ontario Teachers Pension Plan. So a lot of people not seeing any upside if this bankruptcy plan is approved.