FTX has decided to abandon its attempts to restart its cryptocurrency exchange and is opting for a liquidation process to fully reimburse its customers, as stated by the company’s attorney on Wednesday.
Over the past few months, FTX engaged in negotiations with potential buyers and investors. Unfortunately, none were willing to invest enough funds to revive the FTX exchange, according to FTX attorney Andy Dietderich during a bankruptcy court hearing in Delaware.
This failed negotiation reveals that FTX was not what it seemed to be. Founder Sam Bankman-Fried did not establish the necessary technology or administration to operate the company effectively as a sustainable business, Dietderich explained. Bankman-Fried has been convicted of fraud charges related to his management of FTX.
“FTX was an irresponsible sham created by a convicted felon,” Dietderich remarked. “The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in a dumpster were simply too high.”
Instead of reopening the exchange, FTX will concentrate on liquidating its assets to repay customers whose cryptocurrency deposits were frozen when the company filed for bankruptcy in November 2022.
FTX has successfully recovered over $7 billion in assets for customer repayment. Agreements have been reached with various government regulators who have agreed to delay collecting on approximately $9 billion in claims until customers are fully repaid, Dietderich noted.
FTX anticipates full repayment to all customers, though the calculation will be based on cryptocurrency prices from November 2022, a period marked by a prolonged slump in the crypto market.
Despite customer complaints about being shortchanged due to the use of November 2022 prices, U.S. Bankruptcy Judge John Dorsey overruled them during Wednesday’s hearing. He emphasized that U.S. bankruptcy law mandates debt repayment based on their value at the time of the bankruptcy filing.
“I have no wiggle room on that,” Dorsey stated. “The Bankruptcy Code says what it says, and I am obligated to follow it.”
FTX cautioned customers not to expect swift repayment as the company needs to thoroughly investigate the legitimacy of customer claims. With a significant gap in its balance sheet leading to potential losses for 9 million customers, FTX sought bankruptcy protection in November 2022.
On November 2, jurors in Manhattan convicted Bankman-Fried on all seven fraud and conspiracy counts he faced. Bankman-Fried’s sentencing is scheduled for March 28, and he plans to appeal his conviction.
