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FTX, the embattled cryptocurrency exchange, has announced the abandonment of its efforts to restart operations. Instead, the company is opting for a liquidation approach, aiming to repay its customers in full. This decision came to light during a bankruptcy court hearing in Delaware, where FTX attorney Andy Dietderich revealed the company's change in strategy.
After months of negotiations with potential investors and bidders, none showed a willingness to invest the substantial amounts required to rebuild the exchange.
Dietderich stressed the stark reality of FTX's situation, describing it as an "irresponsible sham" created by founder Sam Bankman-Fried, who is now convicted on fraud charges.
FTX's new focus will be on liquidating assets to reimburse customers, with over $7 billion already recovered for this purpose.
A major caveat
FTX's decision to liquidate assets rather than attempt a relaunch has brought some relief to its customers, albeit with a caveat.
The company plans to repay customers in full, but the repayment will be calculated based on the November 2022 values of cryptocurrencies, a period when the market was experiencing a significant downturn.
This decision has sparked complaints among numerous customers, as the value of cryptocurrencies like Bitcoin has risen considerably since then.
For instance, Bitcoin's value has increased from roughly $17,000 in November 2022 to about $43,500 at present.
A long road ahead
Despite the promise of full repayment, the path forward for FTX is not without its challenges. As stated by Dietderich during the court hearing, the process of reviewing and validating the millions of claims against FTX is a daunting task.
The objective is clear, but achieving it involves substantial work and risk. The decision to drop the efforts to restart or sell the FTX crypto exchange came after realizing the high costs and risks involved, further complicated by the tangled web of debts and assets left behind by Bankman-Fried.
The company's advisors have been diligently working to track down assets and manage the complex debt structure, nearly doubling their cash pile to $4.4 billion by the end of 2023.
The court hearing also set the stage for determining the exact amounts owed to each creditor and customer, based on their status on the day FTX filed for bankruptcy.