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Homeweb3.0Despite Being Declared Worthless by a US Bankruptcy Judge, the FTT Token Surged on Monday

This has infuriated some investors because those assets have increased in value since the exchange's collapse. Instead they'll get the monetary value of those assets at the time of the collapse back.

Despite Being Declared Worthless by a US Bankruptcy Judge, the FTT Token Surged on Monday

FTT, a token once touted by failed crypto exchange FTX, surged on Monday as a US bankruptcy judge declared it worthless.

The token, which was used to reward FTX customers and lower their trading fees, soared by 20.1% on Tuesday, reaching $4.60 a token.

This comes after Judge John Dorsey, of the US Bankruptcy Court of the District of Delaware, said during a hearing on Monday that he had “no evidence today that the value of FTT tokens would be anything other than zero.”

The judge was overruling a request from creditors who held the FTT token in their FTX accounts when the exchange collapsed.

That hearing, which lasted more than five hours, brought FTX’s two-year bankruptcy to a close.

Judge Dorsey approved FTX’s plan to repay its creditors, with 98% of them set to receive all the money they lost, and then some. But, controversially, not all the crypto they lost.

This has left some investors fuming, as those assets have increased in value since the exchange’s collapse. Instead they’ll get the monetary value of those assets at the time of the collapse back.

FTX expects to distribute between $14.7 billion and $16.5 billion, making it “the largest and most complex bankruptcy estate asset distribution in history,” according to John Ray, the executive hired to lead the company through the bankruptcy process.

However, crypto markets were muted on Tuesday. As of Tuesday morning London time, Bitcoin had dipped by 1.7% since just before Judge Dorsey approved the repayment plan, trading at about $62,400. It has recovered slightly since.

Meanwhile, Ethereum had dipped by 1.3%, to $2,430, and Solana — the cryptocurrency whose fortunes were most closely tied to FTX — fell by 2.1%, to $145.

FTT, on the other hand, jumped by 20.1%, to $4.60.

Like other tokens issued by centralised exchanges, FTT granted holders certain privileges. In this case, it was lower trading fees on FTX.

It was initially worth about $25 a token prior to the exchange’s collapse, and hovered around $1 for a year after FTX filed for bankruptcy, occasionally spiking along with reports that Ray was considering rebooting FTX.

Those plans have been dead for months, but FTT's value refused to go with it. Lawyers for the bankrupt exchange repeated on Monday that they had no plans to launch a new FTX, under that or any other name.

“FTT has no fundamental value because it has no utility outside of operating the ftx.com exchange,” said Brian Glueckstein, of Sullivan and Cromwell. “There is no and there will be no restarted ftx.com exchange.”

Over the course of the bankruptcy proceedings, some victims have railed against the decision to repay creditors exclusively in cash, rather than the assets they held on FTX at the time of its collapse.

According to FTX, some 98% of creditors will get 119% of their claims’ value. Those claims are based on the value of crypto in November 2022, when the company filed for bankruptcy and Bitcoin was trading for less than $20,000. This means creditors will miss out on the rally crypto has enjoyed since.

But FTX couldn’t pay customers in crypto because it never had that crypto, according to Steven Coverick, of Alvarez & Marsal.

Distributing repayments in-kind “would mean the debtors would have to purchase that cryptocurrency on the open market in order to make in kind distributions,” he said.

FTX “would then have to go purchase billions of dollars of cryptocurrencies in those quantities which would … result in a run up in the market.”

Despite the controversy surrounding in-kind payments, the vast majority of creditors supported the reorganisation in a vote earlier this year, according to court documents.

“I want to say congratulations,” Judge Dorsey said. “This is a model case for how to deal with a very complex Chapter 11 bankruptcy.”

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