FTX aims to reimburse customers but has warned that the exchange is in no position to aim for a restart of operations or has no plans to launch FTX 2.0.
It would be hard to find fans of the now-defunct FTX crypto exchange, especially after what its former CEO and founder, Sam Bankman-Fried, did to the cryptocurrency market. But, even if the FTX exchange has some leftover followers who were hoping or rather dreaming that the exchange may be revived one day, their dreams are about to get shattered.
In a recent statement made by the FTX legal team, it was revealed that there is little to no chance that the crypto world would see the revival of the FTX exchange, or to be more precise, see the launch of FTX 2.0, largely because they couldn’t manage to find any new investors that were ready to commit the needed capital to launch FTX 2.0.
And if the general crypto population is wondering why no one is willing to invest the required capital, the past failures of SBF were reason enough to keep away from this venture.
The personnel responsible for the current operations of the FTX exchange has said that the current restructuring plan of the FTX exchange doesn’t include the rebooting of the firm; instead, the primary focus of the plan is to repay the customers in full, which fell victim to the FTX implosion incident and lost funds that were stored in the crypto exchange at the time.
During a January 31st hearing in the U.S. Bankruptcy Court for the District of Delaware, FTX’s attorney, Andy Dietderich of Sullivan and Cromwell, they expressed cautious optimism about fully reimbursing users and creditors.
However, he emphasized that it was an objective, not a guarantee. Despite exhaustive efforts, there are no current plans to relaunch FTX, referred to as FTX 2.0, within the existing Chapter 11 bankruptcy framework.
Dietderich highlighted that investors are still waiting to show their commitment and invest the capital required to revive the exchange. However, Dietderich did give some initial indications of how the customers of the exchange and the creditors who are owed money by the exchange may get paid in full.
He said: “Based on our results to date and current projections, we anticipate filing a disclosure statement in February describing how customers and general unsecured creditors […] with allowed claims will eventually be paid in full. No investor is ready to commit the needed capital to restart the offshore exchange, nor has a buyer emerged for that exchange as a going concern.”
Dietderich had to shed light on the incidents of the past, more accurately, on the unethical practices of former CEO of FTX Sam Bankman-Fried as well as the not-so-meticulous financial and record-keeping practices under his tenure, which was a cause of concern and worry for any potential new investors.
Furthermore, Dietderich mentioned that LedgerX, one of the few FTX branches purportedly solvent during the November 2022 bankruptcy filing, was characterized as a horrible investment.
Sam Bankman-Fried was found guilty on multiple charges related to fraud at the FTX exchange and its sister company, Alameda Research, in November 2023. The charges for which he was found guilty consisted of:
- Two counts of wire fraud: Accused of misleading investors about FTX’s financial health.
- Two counts of conspiracy to commit wire fraud: Accused of scheming with others to defraud investors.
- One Count of Commodities Fraud Conspiracy: Market manipulation within specific commodity futures markets through coordinated trading activities between FTX and Alameda.
- One Count of securities fraud: Accused of making false and misleading statements about FTX’s financial condition.
- One Count of money laundering conspiracy: Accused of conspiring to launder money obtained from illegal activities.
During the five-week trial, former Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and former FTX engineering head Nishad Singh pleaded guilty to various charges and collaborated with the government, testifying against FTX CEO Sam Bankman-Fried.
Bankman-Fried, who had pleaded not guilty, took the stand, attributing FTX’s November 2022 collapse to several big mistakes.
He distanced himself from key decisions, placing blame on Wang for a function allowing Alameda to trade funds it didn’t possess.
Bankman-Fried denied wrongdoing in FTX’s relationship with Alameda and framed using customer funds as Alameda borrowing from the exchange.
He also blamed Ellison for not focusing on risk management and didn’t believe he defrauded FTX customers by taking over $8 billion worth of their funds.
Bankman-Fried’s sentencing hearing is scheduled to take place on March 28.
The FTX’s token (FTT) price rose nearly 12% when Dietderich announced reimbursing the customers and creditors to $3.01 from $2.67. However, it later fell to $2.20.
In December 2023, FTX debtors recommended reimbursing claimants at the bankruptcy’s crypto asset prices, which were $16,871 for Bitcoin and $1,258 for Ether. However, FTX creditors proposed repaying in the form of specific crypto holdings or in-kind payments.
In-kind payment means repaying the debt with specific crypto holdings or assets rather than providing an equivalent cash value based on market prices or other metrics.
It involves returning the same type of asset that was borrowed or owed, maintaining the nature of the original financial agreement.
However, in a January 31 ruling, Judge John Dorsey sided with the debtors, emphasizing the clarity of the law on this matter.
