FTX says it may restart its collapsed crypto exchange

Last November, crypto giant FTX collapsed in spectacular fashion, bringing comparisons to the downfall of Lehman Brothers and criminal charges against founder and former CEO Sam Bankman-Fried. Now, five months later, the company is looking at the possibility of starting up again.

FTX attorney Andy Dietderich at a court hearing on Wednesday said FTC is starting to think about its future—something many did not expect the company to have—and that it’s in the process of negotiating a reboot with stakeholders.

A decision is expected as soon as the end of June.

“The situation has stabilized, and the dumpster fire is out,” Dietderich said.

News that the exchange could reopen has lit a fire under FTX’s FTT token, which has soared roughly 70% since Wednesday afternoon. Before Dietderich’s comments, FTT was trading at $1.30. By midday Thursday, the price had jumped to $2.23.

At their peak, FTT tokens were worth $79.53 in September of 2021, according to CoinMarketCap.

Analysts were cautious about the rise. “Ultimately, if the exchange doesn’t reopen, there is little use for the coin and it goes back to nothing,” said Cory Mitchell, an analyst from the educational trading website Trading.biz. “On the other hand, if the exchange does reopen, the coin’s purpose is reborn and it could trade significantly higher . . . assuming the FTT coin is an integral part of the relaunch of the exchange.”

It’s not the first time the new management at FTX has floated the idea of restarting the exchange. Current CEO John J. Ray III first raised the possibility in January. But Dietderich’s comments at the court hearing, along with a deadline for a decision, have raised hopes and stoked new speculation in the digital currency.

Restarting the exchange won’t be easy. FTX says it will need to raise significant capital or convert creditor holdings into an ownership interest in the reboot. (Since new management has taken over the company, FTX has recovered $7.3 billion in assets, including $2 billion in cash and $4.3 billion in cryptocurrency.)

“There are possibilities that customers could have an option to take part of their proceeds that they would otherwise receive in cash from the estate and receive some kind of an interest in the exchange going forward,” attorneys said in the court hearing.

 

There’s definitely some public relations work to be done as well. While SBF is no longer involved with the company, his shadow still looms large. And any relaunch will come as he faces civil and criminal charges for what federal prosecutors have dubbed “one of the biggest frauds in American history.”

Bankman-Fried has pleaded not guilty to all of the 13 charges against him, which include fraud, conspiracy, and campaign fraud. Three other former FTX executives—Nishad Singh, Caroline Ellison, and Gary Wang—have all pleaded guilty to fraud charges.

Still, even the possibility that FTX could rise phoenixlike from the ashes is somewhat astonishing, given how Ray described things when he took over.

Previously best known as the lawyer who was hired to oversee the liquidation of Enron after the energy giant’s accounting scandal, Ray initially exclaimed in the company’s bankruptcy filing, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

What remains unclear is whether FTX customers who lost money in the company’s collapse will be able to reclaim lost funds. So far, they haven’t. And only customers in the company’s subsidiary in Japan have been allowed to withdraw funds from their accounts, due to strict consumer protection laws in that country.