BitMart has proposed its first concrete plan to repay the more than 12 million users locked out of their accounts. The exchange has placed the blame for its balance-sheet hole on a security b
BitMart has proposed its first concrete plan to repay the more than 12 million users locked out of their accounts.
The exchange has placed the blame for its balance-sheet hole on a security breach that happened almost five years ago. The preliminary proposal values the December 2021 hack at $319.5 million and asks a court to approve whatever payout users eventually accept.
BitMart has published a document on its help center more than two months after it began shutting down its trading platform on July 26. The document contains the proposed plan to repay users who have had their withdrawals pending.
Under the proposal, every account balance would first be frozen into a single dollar figure that BitMart calls a “Dollarised Account Balance.”
The balance will be based on the average trading price of a user’s tokens between July 26 and a record date that has not been set yet. For transparency, a court-appointed officer would have to verify and confirm that the numbers are accurate.
From there, users will be able to pick one option or choose a blend of several. The first is an upfront payout in which users will receive a proportional share of BitMart’s liquid holdings, including cash, the stablecoins USDC, PayPal USD (PYUSD), and Tether (USDT), plus Bitcoin (BTC), Ether (ETH), and Solana (SOL).
The second option is a “Restitution Token,” which will convert each dollar of a user’s balance into one unit tied to whatever BitMart got back from the 2021 hack. The exchange said recent private forensic work on the hack revealed “certain pockets of value” that are sitting on unnamed centralized exchanges.
The third option users have is to accept a “Continuum Token,” which would trade on decentralized exchanges and get its value from BitMart’s investments, the eventual sale of hard-to-move assets like private equity stakes and altcoins. The token would also gain value from a share of future profits if the company can raise enough to reopen.
BitMart has presented affected users with three repayment options
In its repayment proposal, BitMart says the December 2021 hack, in which attackers stole digital currency from the platform, cost it $319.5 million. The total breakdown BitMart published on December 4, 2021, lists the stolen amounts as $164.1 million in Ether, $96.5 million in BNB, $51.5 million in Bitcoin, and $7.4 million in other currencies.
That total is well above what was reported when the hack happened. BitMart’s public statement at the time put the damage near $150 million, while the blockchain security firm Peckshield estimated it closer to $200 million.
The company’s then-CEO, Sheldon Xia, promised to cover the losses from the company’s own funds and said no customer assets would be harmed.
BitMart is working with restructuring firm Alvarez & Marsal and law firm White & Case. Cryptopolitan’s earlier reporting covers when these same advisers were brought on in September.
Over the next three to four weeks, the exchange plans to hold discussions with the 50 users holding the largest balances, take broader feedback through October, revise the plan in November, and apply to the courts in December or January.
BitMart’s Global CEO Nenter (Nathan) Chow laid out plans to expand prediction markets and tokenized assets in a first-half update. He also declared that the eight-year-old exchange intended to last another eight.
Fast forward to late July, Chow said he was told on July 24 his employment was ending and that he was never consulted on the wind-down, which sent the BMX token down almost 60% in a day.
BitMart said it had considered taking a $10 million cash investment from an unnamed investor but called the amount “manifestly insufficient.” The offer reportedly came from Echo Base, a firm that invests in struggling companies. Echo Base says BitMart never replied to its August 6 proposal to fund a bankruptcy plan agreed with creditors in advance.
Echo Base has since formed a committee of people owed money by BitMart and hired the law firms Young Conaway Stargatt & Taylor and Ashbury Legal. The group is currently considering whether creditors can force the exchange into bankruptcy.
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