Tech
FTX Abandons Crypto Exchange Return
The chances of a comeback for a disgraced cryptocurrency exchange that was at the center of a high-profile legal case appear to be over.
Reuters on Wednesday cited a lawyer for FTX as saying it had abandoned efforts to restart its cryptocurrency exchange, opting instead to liquidate all assets and return funds to customers.
FTX was at the center of the high-profile fraud trial of former cryptocurrency billionaire, founder and CEO Sam Bankman-Fried, who in November 2023 he was found guilty of all charges for his role in the collapse of FTX and Alameda Research.
Sam Bankman Fried. Image credit: FTX
Do not come back
FTX had collapsed into Chapter 11 bankruptcy protection in November 2022, when a multibillion-dollar flaw was found in its balance sheet – amid reports of financial improprieties.
The collapse was triggered after management had it failed to secure a bailout offer and additional financing.
Bankman-Fried stepped down as CEO and was replaced by turnaround specialist John J. Ray III heavily criticized management practices by Bankman-Fried.
He claimed that Bankman-Fried had done so failed to implement “Basic and widely accepted” security controls to protect its crypto assets, such as the use of “cold” wallets rather than those directly connected to the Internet, or the use of multi-factor authentication.
Reuters reported that FTX had been negotiating for months with potential bidders and investors, but no one was willing to put up enough money to rebuild the FTX exchange, FTX attorney Andy Dietderich said during a bankruptcy court hearing in Delaware this week .
The failed negotiations underlined the fact that FTX was never what it appeared to be, and founder Sam Bankman-Fried never built the underlying technology or administration needed to run the company as a profitable business, he Dietderich said.
Convicted criminal
“FTX was an irresponsible farce created by a convicted felon,” Dietderich was quoted as saying. “The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in a dumpster were simply too high.”
According to Reuters, FTX will instead focus on liquidating its assets to repay customers whose cryptocurrency deposits were frozen when the company filed for bankruptcy in November 2022.
FTX has recovered over 7 billion dollars in business to repay customersand has reached settlements with various government regulators who have agreed to wait until customers are fully repaid before attempting to collect about $9 billion in claims, Dietderich reported.
FTX now plans to pay all customers in full, although it will calculate the refund based on cryptocurrency prices as of November 2022, when the cryptocurrency market was experiencing a prolonged slump.
Investors cheated?
However, Reuters noted that dozens of FTX customers have complained of being cheated by using November 2022 prices.
This is because, for example, the price of bitcoin has risen to around $43,300 from the November 2022 price of $16,872.
However, US Bankruptcy Judge John Dorsey apparently rejected such customer complaints and approved FTX’s use of 2022 prices during Wednesday’s hearing, saying US bankruptcy law is “very clear” that debts must be repaid based on their value on the date a company filed for bankruptcy. .
“I have no leeway on this,” Dorsey reportedly said. “The bankruptcy code says what it says and I am obligated to follow it.”
Sam Bankman-Fried faces up to 110 years in prison if Judge Lewis Kaplan gives him the maximum sentence and consecutive terms.
The disgraced former cryptocurrency billionaire will learn how much time he will spend in prison at his sentencing hearing on March 28, 2024.