Bankrupt cryptocurrency exchange FTX will cease to exist after abandoning its efforts to relaunch the platform. The exchange also vowed to pay every customer back once it has "sufficient funds to pay all allowed customer and creditor claims in full".
The claims were made by FTX Lawyer Andrew Dietderich on Wednesday during a bankruptcy hearing. The lawyer also explained the exchange had recovered over $7 billion so far, which would be used to repay customers.
With over $9 billion in claims so far, multiple U.S. regulators have accepted a proposal to wait until all customers are repaid, in which case FTX would proceed to pay the different agencies.
After all that drama, it looks like FTX is being thrown into the dumpster fire of financial history.
Forget About FTX 2.0
FTX informed the public and regulators about its intention to reorganize the business and reboot under what was nicknamed "FTX 2.0". The exchange reportedly contacted over 75 bidders for this purpose but was unable to get a buyer. According to Dietderich, FTX was doomed to fail right from the start as it was not more than "an irresponsible sham created by a convicted felon".
This lack of technological and financial infrastructure meant that the costs of rebuilding over "what Mr. Bankman-Fried left in a dumpster" would have been "simply too high". As such, FTX was unable to find investors or bidders willing to risk the money necessary to reboot the exchange despite the team's efforts.
Now that plans for FTX 2.0 have been scrapped, the exchange is focusing its efforts on getting all assets liquidated to repay customers, something that Dietderich "anticipates" will be possible. While most FTX customers received the news with glee, many believe that more has to be done in order to ensure proper compensation is given for the failure to protect their funds.
Storm Clouds Ahead for FTX Customers
As part of the bankruptcy process, FTX has said customers would be repaid based on the value of their assets back in November of 2022. Many customers believe that such a decision means they would be shortchanged by the exchange, given the low value the assets had at the time compared to today's market.
Reuters reported earlier this year that "dozens of FTX customers" had requested a judge to declare that decision null, preventing the exchange from deciding the price unilaterally. Not only did many customers believe this equals a "second act of theft" but many expressed their belief that something "much shadier" could be taking place.
As FTX claims that American bankruptcy law dictates such valuation for the assets, FTX customers should expect to have an uphill battle getting their repayments adjusted for volatility. While an update of the value is possible in some instances, FTX's decision not to reorganize and reboot the exchange makes this more unlikely.
Bankman-Fried Still Has a Role To Play
While Sam Bankman-Fried was convicted of all charges back in 2023, the fallen crypto magnate still has a role to play in the FTX saga. This is in the form of his remaining assets, which would be used to liquidate part of the debt the exchange has with its customer base.
Bankman-Fried parents were sued by FTX back in September as the company believes they would have "enriched themselves" as a result of their son's misconduct. This included a $10 million cash gift, a $16.4 million luxury property in the Bahamas, and many other assets.
The couple filed to dismiss the case earlier this year, a move that could determine whether their assets can be seized or not. While not over, the FTX saga seems to be drawing to a close. We are left to wonder what people will recoup from the exchange, if anything of value.
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