FTX scraps revival plans, focus shifts to creditor payouts
The bankrupt cryptocurrency exchange FTX said it will fully repay its former customers, despite shelving plans to restart the exchange.
FTX, which fell into bankruptcy in late 2022 under the leadership of then-CEO Sam Bankman-Fried, has faced turbulent times. Bankman-Fried was later found guilty of defrauding customers, lenders, and investors of the exchange. Despite these challenges, FTX lawyer Andrew Dietderich said in a court hearing that the exchange anticipates having enough funds to settle all allowed claims from customers and creditors in full.
However, Dietderich informed the judge that there are no plans to resurrect the FTX platform. He mentioned that various business acquisitions made by FTX, amounting to hundreds of millions of dollars, have now shown little value, and there is a lack of interested buyers. One such disappointment includes the proposed concept of FTX 2.0, which failed to attract necessary investor capital for a restart, despite possessing valuable customer data.
In contrast to these setbacks, FTX CEO John J. Ray III had previously indicated to the Wall Street Journal in June about initiating processes to reboot the FTX.com exchange. There was speculation of a likely rebranding as part of any restart.
During the hearing, a lawyer representing the official committee of unsecured creditors acknowledged the update from FTX as a “watershed moment.” They noted that while the repayment plan based on the petition date values might not feel adequate for many, given the shar drop in the value of cryptocurrencies, the petition date remains the necessary point of reference.
Additionally, the judge approved a motion to convert claims in digital assets to U.S. dollars. The judge deemed the estimation method proposed by the debtors as fair and reasonable, marking a major step in addressing the claims of customers and creditors affected by the collapse of FTX.
According to a Bloomberg report, as of December 2023, FTX liquidators nearly doubled the company’s cash reserves to $4.4 billion, up from $2.3 billion in October.
While FTX’s move to liquidate assets and raise funds to repay its creditors, there’s ongoing debate among customers over the valuation of their claims. Several clients of the now-defunct cryptocurrency exchange are disputing the method the company plans to use for valuing their deposits in the ongoing bankruptcy proceedings.
FTX’s bankruptcy plan involves reimbursing customers in U.S. dollars based on the crypto prices at the time of its bankruptcy filing in November 2022. Customers argue that this method undervalues their assets due to the recent market recovery.