FTX dropped efforts to restart its cryptocurrency exchange, opting instead for a liquidation that will properly recompense customers.
FTX has abandoned plans to revive its cryptocurrency exchange, instead choosing a liquidation that will fully compensate consumers, a company attorney said on Wednesday.
FTX has been speaking with potential buyers and investors for months, but none have been ready to commit enough money to rebuild the FTX exchange, according to FTX attorney Andy Dietderich at a bankruptcy court hearing in Delaware.
The unsuccessful negotiations highlighted the reality that FTX was never what it appeared to be, and founder Sam Bankman-Fried never established the underlying technology or administration required to run the company as a sustainable corporation, Dietderich stated. Bankman-Fried was convicted of fraud charges stemming from his FTX operations.
“FTX was an irresponsible sham created by a convicted felon,” Dietderich explained. “The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in a dumpster were simply too high.”
FTX will instead focus on liquidating its assets to refund clients whose bitcoin deposits were frozen after the company declared bankruptcy in November 2022.
FTX has recovered more than $7 billion in assets to compensate consumers, and it has negotiated agreements with various government regulators to wait until customers have been fully refunded before attempting to collect on approximately $9 billion in claims, according to Dietderich.
FTX currently aims to reimburse all customers in full, although payback will be calculated based on cryptocurrency values beginning in November 2022, when the crypto market had a sustained fall.
Dozens of FTX clients have complained that using November 2022 rates has left them shortchanged. Bitcoin is now worth approximately $43,300, up from $16,872 in November 2022.
During Wednesday’s hearing, U.S. Bankruptcy Judge John Dorsey overruled the consumer concerns and authorized FTX’s use of 2022 prices, stating that U.S. bankruptcy law is “very clear” that debts must be reimbursed based on their worth at the time a firm files for bankruptcy.
“I have no wiggle room on that,” Dorsey added. “The Bankruptcy Code says what it says, and I am obligated to follow it.”
FTX stated that customers should not expect prompt repayment because the company is currently investigating which customer claims are credible.
FTX filed for bankruptcy in November 2022, with a gap in its balance sheet that put 9 million customers at risk of billions of dollars in losses.
On November 2, jurors in Manhattan convicted Bankman-Fried of all seven counts of fraud and conspiracy. Bankman-Fried’s sentencing date is March 28. He is likely to appeal his conviction.
Do Follow: CIO News LinkedIn Account | CIO News Facebook | CIO News Youtube | CIO News Twitter
About us:
CIO News, a proprietary of Mercadeo, produces award-winning content and resources for IT leaders across any industry through print articles and recorded video interviews on topics in the technology sector such as Digital Transformation, Artificial Intelligence (AI), Machine Learning (ML), Cloud, Robotics, Cyber-security, Data, Analytics, SOC, SASE, among other technology topics.
