In a court hearing on Wednesday, bankruptcy lawyers of the FTX crypto exchange revealed that they would not restart the collapsed exchange, as buyers had shown a lack of interest.
However, the company added that it expected to make full repayments to ‘allowed’ customers and ‘general unsecured creditors’ who had been affected by the sudden shutdown in November 2022 due to liquidity problems.
The hearing
Andy Dietderich, the FTX lawyer, described the Chapter 11 plan of the company in a hearing that took place in the District of Delaware’s Bankruptcy Court.
He disclosed the plan they had come up with after substantial funds had been recovered from associated firms and crypto holdings had been sold gradually to fund repayments.
The lawyer said that they could not predict some measure of success cautiously. He added that considering the current results and projections, they would file a disclosure statement in this month.
The said statement would describe how general unsecured creditors and customers who have allowed claims would be fully repaid.
He did assert that he wanted the stakeholders and court to understand that they were not guaranteeing it, but it was an objective.
The problems
Dietderich said that there was still a great deal of risk and work involved until they get to the objective, but they believed it was possible and had come up with a strategy to achieve it.
He also highlighted some of the ‘disappointments’ they had faced during the process, which included difficulty finding interested buyers or a significant return on the sale of some pieces of business.
He referred to the acquisition of Ledger X, a derivatives platform, by FTX as a horrible investment and last year, they sold it for a price of $50 million.
This was just a fraction of the original price that had been paid to acquire it in 2021 of about $300 million.
Similarly, he referred to the ‘FTX 2.0 plan’ as a disappointment. This was the attempt to find a buyer for the exchange to relaunch it. He affirmed that they do not have any plans to restart the exchange.
Additional details
The lawyer stated that they still had valuable customer information and data that can be monetized. But, he said that after putting in a great deal of effort, no investor had been willing to commit.
No one was willing to invest the capital required for restarting the exchange, nor was there a buyer for the exchange as a going concern.
Dietderich added that the lack of interest was mostly due to the disastrous state of the company when it collapsed.
He elaborated that the exchange was not what it seemed and had not acquired much substance in the brief time it existed.
He also highlighted the failed leadership of former CEO and co-founder, Sam Bankman-Fried, who was convicted of fraud in November.
He said that after Sam Bankman-Fried left, the risks and costs of creating a viable exchange from it were just too high.