FTX Battles to Dismiss 'Sam Coins' Claims in Bankruptcy Case

FTX, the troubled crypto exchange, seeks to dismiss investor claims for so-called "Sam Coins," arguing that they should be valued at zero in the ongoing bankruptcy proceedings. In a March 26 hearing, FTX's lawyers asked Delaware bankruptcy Judge John Dorsey to steeply discount customer claims for several digital tokens closely associated with the jailed FTX founder Sam Bankman-Fried.

Embattled FTX Seeks to Dismiss 'Sam Coins' Claims

Background

Troubled cryptocurrency exchange FTX is seeking to dismiss customer claims on so-called "Sam Coins," arguing that they should be valued at $0 in its ongoing bankruptcy case.

At a March 26 hearing, lawyers for FTX urged Delaware bankruptcy judge John Dorsey to heavily discount customer claims on a series of digital tokens closely associated with jailed FTX founder Sam Bankman-Fried.

FTX attorney Brian Glueckstein said customer claims on the native tokens of the travel platform Maps (MAPS), decentralized finance (DeFi) brokerage Oxygen (OXY), decentralized exchange Serum (SERUM), and Boba (BOBA) should be discounted heavily or to $0.

Glueckstein explained that experts applied a conservative analysis to the assets' claims-based price to determine a reasonable markdown on their value.

"Customers are ascribing values to these digital asset claims that assume a market that never existed and will never exist," he said.

FTX's valuation expert, Sabrina Howell, concluded that as the company holds over 95% of OXY and MAPS tokens – which were closely tied to SBF – it would take decades to liquidate them.

Valuation Dispute

Based on their analysis, FTX asserted that claims tied to MAPS and OXY tokens – worth over $600 million at current rates – should be deemed worthless. Meanwhile, claims related to SERUM tokens, worth $509 million, should be discounted by 58%.

However, FTX customers holding these "Sam Coins" have objected to the valuations and requested a rejection of FTX's lawyers' estimations. The customers contested that the four digital assets collectively remain worth over $1.1 billion.

Judge Dorsey acknowledged the difficulty in definitively quantifying the value of cryptocurrencies, describing the digital assets as "intrinsically worthless."

"The only value they get is from the transactions that occur," he said. "As far as I can tell, crypto trades based on sentiment and nothing else."

He heard arguments from both sides and indicated he would consider the matter before issuing a ruling on how the disputed crypto assets should be valued.

Token Performance

MAPS is the Solana-based native token for the Alameda-backed Web3 travel platform Maps.me. It has plummeted 98% since its May 2021 all-time high near $2, trading at $0.03 at the time of writing.

OXY, the token for the Alameda Research-backed Solana-based Oxygen DeFi brokerage, has also shed 98% against its ATH, currently trading at $0.08.

SERUM is the token for the FTX-backed decentralized exchange of the same name. It has lost 99.5% from its highs, now priced at $0.06 per token.

Sam Bankman-Fried's Legal Woes

Bankman-Fried faces seven fraud charges from US authorities nearly a year after FTX's collapse. Prosecutors recently recommended a maximum sentence of 50 years in prison, while his lawyers argue that it's unfair to portray him as a "corrupting supervillain."

Conclusion

The outcome of FTX's attempt to dismiss customer claims on "Sam Coins" will have implications for the valuation of the company's assets in the ongoing bankruptcy proceedings. The court's decision may provide guidance on the treatment of digital assets in future bankruptcy cases involving crypto companies.