In a significant development in the FTX bankruptcy saga, the company has decided it will not revive the exchange and will instead liquidate its assets to fully compensate customers affected by its collapse.
The decision was announced by FTX’s attorney, Andy Dietderich, during the exchange’s latest bankruptcy hearing on Jan. 31. The exchange’s native token FTT fell 13.95% following the news and is currently trading at $2.33, according to CryptoSlate data.
Reboot unfeasible
He explained that despite months of negotiations with potential investors and bidders, the company failed to secure sufficient funding to rebuild the exchange. This lack of interest from investors has been attributed to the inherent flaws in FTX’s operations, as revealed during the bankruptcy proceedings.
Dietderich said FTX was “fundamentally flawed” and did not have the necessary technology and administrative structure to operate viably. He pointed to the actions of the company’s founder, Sam Bankman-Fried, who has been convicted of fraud charges, as central to the company’s downfall.
Dietderich added that FTX was an “irresponsible sham” and that resurrecting the exchange from its current state would be impractical.
Instead, FTX will focus on liquidating over $7 billion in recovered assets to repay customers. These assets were frozen when FTX filed for bankruptcy in November 2022. Regulators have reportedly agreed to wait for their claims until after the exchange has repaid its customers.
Arduous repayment process
However, the repayment process is not without contention. Customers have raised concerns over the valuation of their repayments, which are based on cryptocurrency prices as of November 2022 — a period of significant market slump.
This valuation method has led to complaints of being shortchanged, especially given the subsequent rise in cryptocurrency values.
However, U.S. Bankruptcy Judge John Dorsey upheld using November 2022 prices for repayment calculations. He clarified that U.S. bankruptcy law mandates debts to be repaid based on their value when filing for bankruptcy, leaving no room for alternative interpretations.
Customers have been cautioned to brace for a potentially lengthy repayment process, as FTX still needs to sift through and validate the legitimacy of claims. This development comes after FTX’s dramatic bankruptcy filing in November 2022, which left millions of customers facing significant financial losses.
