FTX’s new CEO, John J. Ray III, said today that the company has begun the process of soliciting interested parties to reopen the FTX.com crypto exchange.
The Wall Street Journal reports that FTX is pursuing efforts to revive its international crypto exchange, even as its reputation continues to decline.
The new allegation
In fact, an additional allegation recently surfaced against the company’s former executives prior to its bankruptcy.
Indeed, it turns out that the company has filed a lawsuit against former executive Daniel Friedberg, namely the Chief Regulatory Officer of FTX and the Chief Compliance Officer of FTX US, as well as General Counsel of Alameda Research.
Friedberg was in charge of regulatory compliance, and they accuse him of buying the silence of two potential whistleblowers to persuade them not to leak information about the company’s regulatory problems, and FTX’s ties to Alameda.
In all, they charge him with 11 felonies, including violating his legal duties and approving a series of fraudulent transfers and loans to other former FTX executives.
The facts relate to 2022, before the company declared bankruptcy and its entire management team was replaced.
The past and present of the crypto exchange FTX
So while FTX’s past is becoming increasingly bleak, the present tells a different story.
In fact, according to the latest Debtors Release, released a few days ago, to date the company has already recovered about $7 billion in liquid assets. In total, it was estimated that the total amount taken away from the exchange’s customers was about $8.7 billion, most of it in fiat currency and stablecoin.
In other words, FTX is not far off from being able to reimburse all former clients, although perhaps not 100%. In that case it might even consider reopening the business.
It is worth noting that only a few months have passed since the closure, so on a technological level, the FTX platform may still be competitive.
The future of the FTX crypto exchange
Especially since many people valued the FTX platform on a technological level, it might make sense to try to reopen the exchange.
The only really big obstacle seems to be the huge debt to creditors, of which former customers are only a part.
However, if they could solve this problem, even perhaps by convincing former customers to accept only partial repayment, they could in fact reopen.
The problem might be the timing, because if some customers get hung up and refuse to accept only a partial refund, they could start a new legal procedure that could slow down the reopening plan quite a bit.
So if they were able to satisfy all of the former customers, they might be able to reopen, perhaps even relatively quickly, but if someone got in the way, the timeline could get much longer.
It is worth mentioning that the bankruptcy occurred at the bottom of the recent bear-market, so the recovery of the crypto market in 2023 may have already helped quite a bit in that regard.
In fact, the debts were calculated in fiat currency at the time of closing, but if the cryptocurrencies still held by the company acquire sufficient value in the meantime, they could even come to cover in full the $8.7 billion required to compensate all former customers.
The possible reopening of the crypto exchange
Moreover, a possible reopening of the exchange could bring new revenue to the company, making it even easier to pay back the misappropriated funds.
This is why the company is talking with investors to support a possible reboot of the exchange through solutions such as a joint venture.
While this does indeed seem possible to date, it is not at all clear how realistically likely it is.
One thing for sure is that reopening the exchange would be the best solution, and would help in no small measure to solve the problem, if only in part perhaps.
The problem is the enormous loss of confidence in FTX on the part of its users, although with the old management completely wiped out, and the charge of the restructuring given to a veteran of this type of crisis like John J. Ray III, this may well turn out to be a minor problem in the end.
The fact is that they liked the FTX platform a lot, and it has left something of a gap in the crypto world, although by now already largely filled by other exchanges.
Certainly those who would have the most to gain from this situation are the company’s creditors, who might also catch a glimpse of the end of the tunnel with much quicker timelines than expected.
Source: https://en.cryptonomist.ch/2023/06/28/crypto-ftx-process-reopening/