- FTX has promised full reimbursement to clients, though the plan has not satisfied everyone.
- No investors were found to revive the exchange, nor were there buyers for the platform itself.
- Liquidators criticized FTX’s business acquisitions.
The bankrupt exchange FTX intends to fully settle its obligations to clients, but a platform relaunch is not being considered. This was stated in court by the company’s liquidators.
“We expect to have enough funds to fully pay all approved claims of clients and creditors,” said FTX attorney Andrew Dietderich from Sullivan & Cromwell.
Lawyers plan to present a detailed reimbursement plan in February.
In November 2022, the exchange filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. A year later, a jury found FTX founder and former CEO Sam Bankman-Fried guilty on all seven counts, including fraud and conspiracy.
Dietderich also reported that after “comprehensive efforts” in restructuring, the team abandoned the plan to relaunch the platform under the tentative name FTX 2.0.
Investors Uninterested in FTX Revival
In January 2022, the company’s CEO John Ray stated that a special task force was exploring the possibility of relaunching the exchange.
In April, Sullivan & Cromwell lawyers announced a restructuring plan for FTX, which included resuming operations. Allegedly, one of the exchange’s creditors, venture firm Tribe Capital, was even interested in the idea.
In August, FTX administrators presented a plan to relaunch the offshore exchange, allowing access for users outside the U.S. Their intentions were criticized by creditors, and the community expressed doubts about the prospects of the renewed FTX.
In October, lawyers reported considering three options: reorganizing independently, finding a partner, or selling the platform.
SEC Chairman Gary Gensler supported the potential resumption of FTX “within the law.”
However, during the hearings, Dietderich admitted:
“No investor is willing to invest the necessary capital to relaunch the offshore exchange, and no buyer has emerged for the operating business. The costs and risks of creating a viable structure from the mess left by Bankman-Fried are simply prohibitively high.”
In this regard, he added that FTX 2.0 was a disappointment for the team, as the company “still possesses valuable customer data and information that could be monetized.”
The lawyer noted that FTX’s business acquisitions worth “hundreds of millions of dollars” turned out to be extremely unsuccessful. There are not many interested buyers for these assets. Even LedgerX — one of the few exchange divisions considered solvent at the time of the parent company’s bankruptcy filing — was “a terrible investment,” Dietderich emphasized.
Nuances of “Full Reimbursement”
In December, FTX administrators proposed a plan to reimburse digital assets to clients and creditors at the rates on the date of the bankruptcy filing. For example, for Bitcoin, this fixed price was $16,871 (at the time of writing — $42,223), and for Ethereum — $1,258 ($2,269).
Bankruptcy Judge John Dorsey provisionally approved this decision, but it sparked objections from some FTX clients.
“Such full payment is based on the value of claims at the filing date. Many of the claims are denominated in currencies whose prices plummeted during the preceding turbulent period,” said creditors’ committee attorney Chris Hansen.
In this case, many clients and creditors will not consider that they have been fully reimbursed, the lawyer added. However, he acknowledged that this is a necessary decision.
During the session, the judge finally approved the conversion plan proposed by FTX:
“Based on the evidence presented and the arguments made in the documents and at the hearings, I find that the approach is adequate, and the debtors’ methodology for evaluating claims is fair and reasonable.”
Back in January, FTX disposed of 22.3 million GBTC shares valued at ~$908 million. As of October 25, 2023, the exchange’s position in the fund was valued at $597 million.