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FTX has officially abandoned its plans to revive its cryptocurrency exchange, choosing instead to liquidate all assets and reimburse customers, as confirmed by a company attorney on Wednesday. Despite extensive negotiations with potential bidders and investors over several months, none were willing to provide sufficient funding to rebuild the FTX exchange, according to Andy Dietderich, an attorney for FTX, during a bankruptcy court hearing in Delaware.
Dietderich highlighted that the failed negotiations exposed the true nature of FTX, asserting that founder Sam Bankman-Fried never established the necessary technology or administration to operate the company as a viable business. Moreover, Bankman-Fried has faced conviction on fraud charges related to his management of FTX. Dietderich characterized FTX as an "irresponsible sham created by a convicted felon," emphasizing the impracticality and risks involved in attempting to transform the remnants left by Bankman-Fried into a functional exchange.
Instead of pursuing a revival, FTX will now concentrate on liquidating its assets to repay customers whose cryptocurrency deposits were locked when the company filed for bankruptcy in November 2022. The company has successfully recovered over $7 billion in assets to fulfill customer repayments and has secured agreements with various government regulators. These regulators have consented to postpone their claims on approximately $9 billion until customers are fully repaid, according to Dietderich. FTX anticipates providing full repayment to all customers, albeit based on cryptocurrency prices from November 2022, when the crypto market was experiencing a prolonged downturn.
While some FTX customers have expressed dissatisfaction with the use of November 2022 prices, citing the significant rise in the price of bitcoin since then, U.S. Bankruptcy Judge John Dorsey dismissed these complaints during the hearing. Judge Dorsey underscored the clarity of U.S. bankruptcy law, stating that debts must be repaid based on their values at the date of the company's bankruptcy filing. Despite the subsequent increase in bitcoin's value, he emphasized his obligation to adhere to the Bankruptcy Code, stating, "I have no wiggle room on that."