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FTX's token FTT is falling again. And while its recent slip isn’t as calamitous as last November when FTX Founder Sam Bankman-Fried’s crypto empire was swiftly wiped out, the recent stumble is still connected to the exchange’s existence—or lack thereof.
The token that offered investors lower trading fees and other perks when transacting on FTX nearly doubled yesterday after the exchange’s lead bankruptcy attorney from Sullivan & Cromwell floated the possibility that the exchange could one day be reopened.
“All options are on the table, but we don't have any particular path forward at this time,” said Andy Dietderich in response to questions raised by Judge John Dorsey about restarting the exchange in a Delaware District Court.
Dietderich said that restarting the company, whether that pertains to FTX’s international exchange or one tailored to U.S.-based investors, would likely require raising capital. He also said there are questions about whether the bankruptcy estate should use its funds to fund the potential restart or seek resources from third parties.
One possibility put forth by Dietderich involved letting FTX’s burned customers divert a portion of what they eventually get back to “receive some kind of interest in the exchange moving forward.”
The token surged as high as $2.63 from $1.32 following the attorney’s remarks. But almost as quickly as it shot up, FTT has since reversed and sunk back down to $2.04, a nearly 19% loss over the past day, according to CoinGecko.
The pump resembles traders’ reactions to a statement made by FTX’s current CEO John J. Ray III in January. The token rose as high as $2.37 after Ray said he had tasked a group with exploring a restart of the exchange’s international arm.
The Chief Investment Officer and Managing Partner of BlockTower Capital, Ari Paul, cast cold water on the notion that FTT would have any value in relation to FTX’s reopening in a tweet Thursday.
“The FTT token [is] extremely unlikely to have any relation to FTX ever again for myriad reasons,” he wrote. “FTT tokens [are] likely just ‘collectibles’ now.”
Yea, don’t know who needs to hear that. The FTT token extremely unlikely to have any relation to FTX ever again for myriad reasons. FTT tokens likely just “collectibles” now. Similar (but less confident) logic applies to idea of new FTX integrating defi or Solana or whatever./1 https://t.co/M1NAXOzNZA
— Ari Paul ⛓️ (@AriDavidPaul) April 13, 2023
Paul explained that the token will likely be a non-factor in any reincarnation of the exchange due to the possibility of legal liability. At the same time, it wouldn’t make sense to provide value to FTT holders that have no legal connection to the bankrupt exchange, he said.
Paul’s comments were made in response to a tweet from Delphi Labs’ General Counsel Gabriel Shapiro, who said: “If you think FTT will play any role in FTX 2.0 other than a potential SEC liability you have brain damage.”
if you think FTT will play any role in FTX 2.0 other than a potential SEC liability you have brain damage
— _gabrielShapir0 (@lex_node) April 12, 2023
A majority of the token’s trading volume took place on Binance over the past day, which accounted for 66% of all volume tracked by CoinGecko at over $160 million. The next most active places for trading FTT were Gate.io and XT.com, which saw around $50 million worth of volume combined.
Though yesterday’s gains of nearly 100% may sound impressive, the token remains down more than 97% from its all-time high of $84.18, set in September of 2021.
FTX filed for Chapter 11 bankruptcy last year after a steep drop in FTT sparked a tsunami of withdraws from FTX customers, which ultimately revealed the exchange did not hold sufficient reserves of customer assets to satisfy traders’ rush for the exit en masse.
Over the course of two weeks last November, the token nosedived to roughly $1.50 from around $26. The token’s value began to slide after CoinDesk reported FTT made up a crucial chunk of the balance sheet at Alameda Research, a trading firm co-founded by Bankman-Fried prior to the creation of FTX.
The revelation raised questions about the relationship between the two firms. And FTT’s tailspin later turned fatal after Binance CEO Changpeng Zhao said the company would dump its holdings of the token.
Bankman-Fried was later arrested in the Bahamas and extradited to the U.S., where he faces 13 criminal charges in connection to the exchange’s collapse. The FTX founder has pleaded not guilty to the charges and his criminal trial is set to take place in October.