FTX Exchange Abandons Plans to Restart Operations, Opts to Repay Customers Instead

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  • FTX has abandoned plans to revive its crypto exchange and will instead focus on selling its assets to repay customers in full.
  • FTX deemed never truly viable due to founder Sam Bankman-Fried’s lack of necessary infrastructure and administration, and the company is now being called an ‘irresponsible sham created by a convicted felon’.
  • FTX will prioritize liquidating its assets to compensate customers whose cryptocurrency deposits were frozen during the November 2022 bankruptcy filing, but customers will be repaid based on November 2022 cryptocurrency prices, when the market was experiencing a slump.

FTX has abandoned plans to revive its crypto exchange and will instead focus on selling its assets to repay customers in full. This decision comes after months of failed negotiations with potential buyers and investors, who were unwilling to invest enough to rebuild the platform.

FTX attorney Andy Dietderich revealed at a recent bankruptcy court hearing that the company was never truly viable, highlighting founder Sam Bankman-Fried’s lack of necessary infrastructure and administration. This aligns with Bankman-Fried’s recent fraud conviction related to his FTX operations.

Dietderich strongly condemned FTX, calling it “an irresponsible sham created by a convicted felon.” He justified the liquidation by stating the immense effort and risk involved in resurrecting the exchange from its current state.

Moving forward, FTX will prioritize liquidating its assets to compensate customers whose cryptocurrency deposits were frozen during the November 2022 bankruptcy filing. Over $7 billion has already been recovered for this purpose, and agreements have been reached with regulators to delay their claims until customer repayment is complete.

However, a point of contention arises from FTX’s decision to calculate repayments based on November 2022 cryptocurrency prices, when the market was experiencing a slump. This disadvantages users who held assets like Bitcoin, which has since seen a significant price increase.

Despite customer complaints, Judge John Dorsey upheld the use of 2022 prices, citing US bankruptcy law that mandates debt repayment based on the value at the filing date. He acknowledged no flexibility in this matter.

While complete customer repayment is expected, it won’t be immediate. FTX requires time to verify the legitimacy of all customer claims before processing distributions.