FTX plans to fully repay customers but not restart exchange, says bankruptcy lawyer

The defunct cryptocurrency exchange FTX said its restructuring plans did not include a “reboot” of the firm but focused on repaying customers in full.

In a Jan. 31 hearing in United States Bankruptcy Court for the District of Delaware, FTX attorney Andy Dietderich from law firm Sullivan and Cromwell said the exchange could “cautiously predict” fully repaying users and creditors but added this was “an objective” and not a “guarantee.” He said that “after an exhaustive effort,” there was no plan to restart FTX — dubbed FTX 2.0 — in its 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.”

The bankruptcy lawyer added:

“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 that under former CEO Sam Bankman-Fried, FTX had kept poor financial and company records regarding assets and employees. The lawyer said that LedgerX — one of the only FTX arms claimed to be solvent when the firm filed for bankruptcy in November 2022 — had been a “horrible investment.”

Related: FTX claims prices rally ahead of anticipated estimation hearing

Bankman-Fried was found guilty of seven felony counts related to fraud at FTX and Alameda Research in November 2023. His sentencing hearing is scheduled for March 28. At roughly the same time as Dieterich’s announcement, the FTX Token (FTT) price surged more than 12% from $2.67 to $3.01 before falling to $2.24.

In December 2023, FTX debtors proposed claimants receive reimbursement based on the prices of crypto assets at the time of bankruptcy: $16,871 for Bitcoin (BTC) and $1,258 for Ether (ETH). FTX creditors, in turn, proposed “in kind” repayments for crypto holdings. Judge John Dorsey sided with the debtors, saying in a Jan. 31 ruling that the law was “very clear” on the matter.

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