FTX Drops Plans to Resurrect Fallen Crypto Exchange

FTX reportedly hopes to pay back as many of its customers as it can.

However, the advisers overseeing the cryptocurrency firm’s bankruptcy have no plans to resurrect the exchange, one of the company’s attorneys said Wednesday (Jan. 31).

“The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in the dumpster were simply too high,” said lawyer Andrew Dietderich, whose comments at a Delaware court hearing were reported by Bloomberg News.

“Mr. Bankman-Fried” is Sam Bankman-Fried, the founder and former CEO of FTX, whose leadership led the company to collapse in 2022, and landed him in prison on fraud and conspiracy charges a year later.

Now, as the company’s new leadership continues to try to undo the damage from that case, restructuring advisers are aiming to pay back customers and creditors who can provide their losses, Bloomberg said, though this will mean examining millions of claims.

“I would like the court and stakeholders to understand this not as a guarantee, but as an objective,” Dietderich said. “There is still a great amount of work, and risk, between us and that result. But we believe the objective is within reach and we have a strategy to achieve it.”

While that task may be difficult, Dietderich said relaunching FTX.com would be impossible, as a lengthy search was unable to find investors willing to put up the money needed for the revival.

Also Wednesday, U.S. Bankruptcy Judge John Dorsey ruled that customer and creditor claims will be based on what they were owed at the time FTX declared bankruptcy.

Many customers had protested this notion, saying that tying their claims to 2022 cryptocurrency prices would rob them of the value of those assets, which have climbed since FTX’s collapse. 

However, FTX’s bankruptcy team has argued it would not be feasible to determine the exact value of each customer’s portfolio, as there are simply too many claims.

“It is simply not realistic that the debtors would be able to liquidate every one of the millions of claims based on digital assets,” FTX said in a filing.

In the end, Dorney said that bankruptcy rules dictate that a company’s debts must be tied to the date it sought Chapter 11 protection.