What is the FTX User Debt Token (FUD)?
FUD (FTX Users’ Debt) is a token issued by DebtDAO that is intended to represent the claims of the highest-priority creditors in the FTX bankruptcy. It was promoted by Huobi as a “top-tier, high-quality FTX debt asset” and was exclusively listed on February 5, 2023.
FTX was once the world’s fourth-largest digital asset spot and derivatives trading platform, but in November 2022, it filed for bankruptcy reorganization due to a liquidity crisis and the improper handling of client funds, causing massive losses to countless investors.
FUD Token Listing and Price Volatility
On February 5, 2023, Huobi announced the launch of deposit services for the FUD token and opened FUD/USDT spot trading on the same day. The following day, Huobi enabled withdrawal services for FUD.
During the initial issuance phase of the FUD token, 1 FUD was pegged at $1. However, after listing on Huobi, the price of FUD surged to as high as $200.
FUD’s Issuance Mechanism and Potential Airdrop
According to DebtDAO, the initial supply and circulating supply of FUD tokens are 20 million, representing 20% of the FTX debt that has been reported. DebtDAO stated that it has received debt claims totaling approximately $100 million from FTX creditors.
DebtDAO stated that once FTX confirms the actual amount of DebtDAO’s FTX debt, DebtDAO will issue additional FUD tokens on a pro-rata basis based on the confirmed debt amount (valued at $1 each) and distribute them to all FUD holders via an airdrop.This means that if the actual amount of debt confirmed by FTX exceeds the value represented by the initial issuance of 20 million FUD tokens, FUD holders will have the opportunity to receive an additional token airdrop.For example, if the confirmed debt amount is $60 million, DebtDAO will issue an additional 40 million FUD tokens on top of the initial 20 million FUD tokens. At that time, users holding 1 FUD token from the initial issuance will receive an airdrop of 2 additional FUD tokens.
Additionally, DebtDAO noted that FUD creditors have priority claims on FTX’s debt and that, following the airdrop, a 1:1 debt buyback will be conducted for FUD holders.
Controversy and Risks Surrounding the FUD Token
Although the FUD token is intended to provide liquidity for FTX creditors, its legality has sparked controversy.Some financial lawyers have pointed out that the FUD token—an FTX bond token issued by DebtDAO—may violate securities laws, describing it as “securitized junk debt that may not even exist” and noting that not all debt claims are equal or fungible.
Additionally, there have been instances of scammers circulating counterfeit FUD tokens on the Ethereum network, prompting investors to remain vigilant against such risks.
Overview of the FTX Debt Trading Market
Following FTX’s bankruptcy, the market for trading FTX claims has gradually become more active. In addition to tokenized claims like FUD, other platforms and methods allow FTX creditors to sell their claims. For example, the founder of Three Arrows Capital launched a new project called GTX, designed to facilitate trading of claims against companies such as FTX.
The price of FTX claims fluctuates as the bankruptcy reorganization progresses. In January 2024, the trading price of FTX claims rose to approximately 80 cents on the dollar ahead of a valuation hearing, as the court was set to seek approval for its cryptocurrency price list. FTX expects to begin the next round of distributions around September 30, 2025, at which time distributions will be made to holders of approved customer equity claims and general unsecured claims. As of February 2025, FTX’s bankruptcy costs had approached $1 billion, but most FTX customers are expected to recover 118% of their claims.
It is worth noting that FTX’s compensation will be settled in U.S. dollars based on the prices of cryptocurrencies at the time of FTX’s collapse. This means that if investors held cryptocurrencies such as Bitcoin at that time, they will only receive compensation equal to the dollar value at the time of the collapse plus interest—even if the prices of those cryptocurrencies have risen significantly by the time of the payout.
