FTX major creditor takes action: restructuring team's income is derived from user assets, valuing creditor rights at market lows

The FTX bankruptcy restructuring team has been seen as representing the side of justice since the incident broke out. However, lawyers for the Committee of International Creditors representing 18 international users with assets totaling $1.94 billion on FTX.com have pointed out that the restructuring team has been tight-lipped about the "utilization of user assets." A motion has been filed requesting the judge to rule that "user assets are user assets" and not "FTX's property."

Precedent: Celsius User Asset Ownership Determination

Previously, attorney Pat Nash representing Celsius had listed the terms of use for Celsius products "Earn" and "Borrow" during a hearing:

According to the Terms of Use (TOUs), token ownership has been transferred to Celsius, and Celsius has the right to use, sell, pledge, and re-pledge these tokens.

However, FTX's terms of service are different and explicit:

Ownership of any digital assets always belongs to the user and cannot be transferred or lent to FTX Trading.

Nevertheless, the International Creditors Committee believes that the FTX restructuring team will not compromise in this manner.

Committee representative attorney Erin Broderick told CoinDesk that the restructuring team's silence on user assets is for no other reason than that user assets are the sole source of payment for restructuring fees and executive salaries:

In this scenario, the relevant professional fees are quite expensive, and I think they will push back on this, part of which is of course, "where do the restructuring team's fees come from"?

FTX Restructuring Team is Valuing User Claims in USD

Broderick also mentioned that another goal of the committee is to prevent FTX from valuing user claims in USD, with the restructuring team already in progress, and the list of creditor assets will be in USD rather than the total amount in cryptocurrency.

She stated:

Dollarization represents the restructuring team's right to liquidate all assets of the exchange, and creditors will receive the residual value that these assets can be exchanged for at their lowest point in the market.

There is currently no precedent for the ownership of user assets on trading platforms to refer to. The Celsius case is still pending a judge's ruling, but funds in non-interest-bearing accounts and custodial accounts have been determined to belong to users rather than Celsius.