Thousands of former FTX clients are eagerly waiting for their money as the bankruptcy proceedings move forward. According to court filings, the exchange owes around $102 million to depositors. Moreover, the firm owes around $3.5 billion to its 50 biggest creditors.
A bond token called FTX Users’ Debt (FUD) was created by DebtDAO for the biggest creditors. With a $1 price tag per token and a 20 million initial supply and circulation, the FUD token will represent 2% of total FTX debt, according to Debt Dao.
Debt DAO said it would create extra tokens and airdrop them to FUD holders after FTX confirmed the actual debt. The first group of creditors to exercise their claim over the debt will be the FUD creditors.
Nonetheless, on Feb. 6, Huobi announced that 18 million FUD tokens will be burned.
Why are 18 million FTX Users’ Debt tokens being burned?
Enthusiasm regarding FUD has led to volatile shifts in price and high trading volumes. Furthermore, prices for the recovery tokens increased to as much as $113 because of high demand.
Prior to this, DebtDAO believed that FUD had a fair value of less than $1. However, the debt was valued at approximately $220 million at the $113 price level of FUD because of the price increase on Monday. Therefore, on February 7, 18 million FUD tokens will be burned in order to align the debt’s price with what DebtDAO deems to be fair value.
After the burn, only 2 million FUD tokens will remain. This will bring its value from the initial 1FUD=$1 equivalent claim to 1 FUD=$10 equivalent claim. Moreover, holders of existing FUD tokens need not take any action, and the value of tokens containing FUD will increase tenfold.
Lastly, Huobi notes that “during the destruction period, FUD assets held by users, pending orders, and order placement functions will not be affected.”