Onetime cryptocurrency darling FTX plans to pay all former customers and creditors in full, the firm’s lawyers told a judge during a court hearing on Wednesday. However, it won’t be rebooting a new version of the defunct exchange due to a lack of interest from buyers.
FTX Shifts Focus To Repayments
Sam Bankman-Fried’s collapsed exchange FTX has made it clear that it has shifted its focus to repaying “allowed” customers and “general unsecured creditors” affected by November 2022’s unprecedented closure following a liquidity disaster, as it abandons plans to reestablish its trading platform.
In the hearing in the United States Bankruptcy Court in the District of Delaware, FTX attorney Andy Dietderich highlighted the firm’s current Chapter 11 plan after recouping considerable funds from associated companies and gradually liquidating cryptocurrency holdings to fund repayments.
Dietderich said the failed exchange could “cautiously predict” fully repaying customers and creditors but noted this was merely “an objective” and not a “guarantee.” “There is still a great amount of work and risk between us and that result, but we believe the objective is within reach and we have a strategy to achieve it,” he added.
The lawyer also described “some disappointments” in the process, including difficulty getting interested buyers or a substantial return on selling off some of the FTX-acquired businesses. He, for instance, called the exchange’s purchase of regulated derivatives platform LedgerX “a horrible investment”. Notably, the sale of LedgerX fetched only $50 million in 2023, marking a $250 million loss for FTX after having paid $300 million for it in 2021.
No FTX 2.0 Reboot
Dietderich also described the FTX 2.0 plans as another “disappointment”, and asserted that they don’t intend to relaunch the exchange.
“We still have valuable customer data and information to monetize,” he posited. “But after an exhaustive effort, no investor is ready to commit the needed capital to a restart of the offshore exchange, nor has a buyer emerged for that exchange as a going concern.”
Current FTX CEO John J. Ray III told The Wall Street Journal in June 2023 that the firm had commenced the process “of soliciting interested parties to the reboot of FTX.com exchange”. Later in November, SEC Chair Gary Gensler hinted he was open to an FTX reboot provided its next leadership remains within the bounds of law.
Dietderich indicated that the lack of serious interest was due to the catastrophic state of FTX at the time of the implosion. The digital asset exchange “was not what it appeared to be,” he posited, and only “existed for a few brief years and never acquired substance.” He then slammed co-founder and former FTX boss Sam Bankman-Fried, who was last November found guilty of pilfering customers’ funds, for his poor leadership.
The bankruptcy attorney added:
“The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in the dumpster were simply too high. So our current Chapter 11 plan does not include the expectation of any recoveries from a restarted ftx.com.”
The price of FTX’s native token, FTT, initially jumped by over 10% on Wednesday as the report on the exchange’s plans emerged. But, the price promptly plummeted as holders dumped their tokens, with the price now down 23.3% over the past 24 hours to trade for $2.04.