February 2, 2024

FTX Abandons Relaunch, Commits to Full Customer Repayment through Asset Liquidation

FTX has officially shelved its plans for a relaunch, opting instead for a strategic move towards asset liquidation with the primary goal of ensuring a complete reimbursement for its customers.

In a significant development, FTX has formally abandoned the ambitious relaunch plans. The company's attorney, Andy Dietderich, made the announcement, emphasizing that the focus has shifted to a comprehensive asset liquidation strategy to honor the commitment of full repayment to its customer base.

This decision comes after months of intensive negotiations with potential bidders and investors. Unfortunately, these discussions failed to materialize into adequate funding for the reconstruction of the exchange.

Dietderich candidly addressed the harsh reality underlying FTX’s operations, stating:

“FTX was an irresponsible sham created by a convicted felon.”

The attorney highlighted the exorbitant costs and risks associated with attempting to rebuild a viable exchange from the remnants left by founder Sam Bankman-Fried, who has faced legal troubles with fraud charges. This pivot towards liquidation serves as a stark acknowledgment of the foundational shortcomings in FTX's technology and administration.

Despite grappling with these challenges, FTX has achieved notable progress in asset recovery, securing funds exceeding $7 billion earmarked for customer repayment. Disbursement of these funds will be based on cryptocurrency values from November 2022, a period marked by a market downturn.

This decision has sparked dissatisfaction among customers who feel shortchanged, particularly considering the significant increase in bitcoin's price since the specified date.

However, US Bankruptcy Judge John Dorsey upheld the chosen approach, stating:

“The Bankruptcy Code says what it says, and I am obligated to follow it.”

In a recent move, FTX sold most of its Grayscale Bitcoin Trust Shares (GBTC), generating approximately $1 billion. This liquidation aligns with the court’s approval in September 2023 for the FTX estate to liquidate over $3.6 billion in assets.

As FTX approaches the final stages of its bankruptcy proceedings, the company has unveiled a proposal to return billions to both its customers and creditors. This represents a crucial phase in resolving the controversy-laden bankruptcy case.

FTX's decision, aimed at settling debts and addressing customer needs, brings to the forefront the intricate complexities and risks inherent in the centralized part of the crypto market.

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