NEW YORK :FTX has abandoned efforts to restart its crypto exchange, instead opting for a liquidation that should repay customers in full, a company attorney said on Wednesday.
FTX has been negotiating for months with potential bidders and investors, but none were willing to put in enough money to rebuild the FTX exchange, FTX attorney Andy Dietderich said at a bankruptcy court hearing in Delaware.
The failed negotiations underscored the fact that FTX was never what it appeared to be, and founder Sam Bankman-Fried never built the underlying technology or administration necessary to run the company as a viable business, Dietderich said. Bankman-Fried has been convicted on fraud charges related to his operation of FTX.
“FTX was an irresponsible sham created by a convicted felon,” Dietderich said. “The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in a dumpster were simply too high.”
FTX will instead focus on liquidating its assets to repay customers whose cryptocurrency deposits were locked when the company filed for bankruptcy in November 2022.
FTX has recovered over $7 billion in assets to repay customers, and it has reached agreements with various government regulators who have agreed to wait until customers are fully repaid before attempting to collect on about $9 billion in claims, Dietderich said.
FTX now expects to pay all customers in full, although it will calculate their repayment based on cryptocurrency prices from November 2022, when the crypto market was suffering a prolonged slump.
Dozens of FTX customers have complained that they are being shortchanged by the use of November 2022 prices. The price of bitcoin has risen to about $43,300 from its November 2022 price of $16,872, for example.
U.S. Bankruptcy Judge John Dorsey overruled those customer complaints and approved FTX’s use of 2022 prices during Wednesday’s hearing, saying U.S. bankruptcy law is “very clear” that debts must be repaid based on their value at the date when a company filed for bankruptcy.
“I have no wiggle room on that,” Dorsey said. “The Bankruptcy Code says what it says, and I am obligated to follow it.”
FTX said that customers should not expect quick repayment, because the company still needs to investigate which customer claims are legitimate.
With a hole in its balance sheet that left 9 million customers facing billions in potential losses, FTX filed for bankruptcy protection in November 2022.
Jurors in Manhattan convicted Bankman-Fried on Nov. 2 on all seven fraud and conspiracy counts he faced. Bankman-Fried’s sentencing is March 28. He is expected to appeal his conviction.
