FTX Intends to Fully Reimburse Clients but Won’t Resume Exchange Operations, Affirms Bankruptcy Attorney
Mitchell Nixon
The inactive cryptocurrency platform FTX has clarified that its restructuring strategy does not involve a revival of the company but rather focuses on complete reimbursement of its users.
During a January 31 hearing at the United States Bankruptcy Court for the District of Delaware, FTX’s legal representative, Andy Dietderich from the law firm Sullivan and Cromwell, expressed cautious optimism about fully repaying users and creditors. However, he emphasised that this was an “objective” and not a “guarantee.” Dietderich stated that, following an exhaustive evaluation, there are no intentions to relaunch FTX, referred to as FTX 2.0, under the current Chapter 11 bankruptcy plan.
“Based on our results to date and current projections, we anticipate filing a disclosure statement in February describing how customers and general unsecured creditors […] with allowed claims will eventually be paid in full,” said Dietderich. “No investor is ready to commit the needed capital to a restart of the offshore exchange, nor has a buyer emerged for that exchange as a going concern.”
He then went on to say: ““The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in the dumpster were simply too high.”
Dietderich reiterated concerns regarding the inadequate financial and corporate record-keeping of assets and employees during the tenure of former CEO Sam Bankman-Fried at FTX. The lawyer highlighted that LedgerX, previously deemed solvent among FTX subsidiaries when the company declared bankruptcy in November 2022, had proven to be a “horrible investment.”
In November 2023, Bankman-Fried was convicted on seven felony counts related to fraud at FTX and Alameda Research, with his sentencing hearing scheduled for March 28. Coinciding with Dietderich’s statement, the price of FTX Token (FTT) experienced a surge of over 12%, rising from $2.67 to $3.01 before eventually falling to $2.24.
In December 2023, FTX debtors proposed reimbursing claimants based on the prices of crypto assets at the time of bankruptcy, suggesting $16,871 for Bitcoin and $1,258 for Ether. FTX creditors countered with proposals for “in-kind” repayments for crypto holdings. Judge John Dorsey sided with the debtors in a January 31 ruling, emphasising the clarity of the law on the matter.