Home / FTX 2.0 is Coming: Here’s Everything You Need to Know
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FTX 2.0 is Coming: Here’s Everything You Need to Know

Last Updated August 1, 2023 10:43 AM
Teuta Franjkovic
Last Updated August 1, 2023 10:43 AM
Key Takeaways
  • A suggested plan by the bankruptcy administrators has been submitted, and it calls for the potential reactivation of FTX.com
  • Only consumers from abroad would be able to access the re-booted exchange
  • According to the plan, FTT token holders would receive nothing
  • John J. Ray III, the CEO of FTX, is pressing forward with his efforts to save the collapsed cryptocurrency exchange
  • The defunct cryptocurrency exchange would probably undergo rebranding as part of this relaunch

Even as new managers revealed how they claim over $9 billion in customer assets were taken before the company’s collapse last year, FTX 2.0 is coming, and it’s boldly continuing with efforts to rebuild its leading worldwide Bitcoin exchange.

According to the company’s current CEO John J. Ray III, commingling and misuse of customer monies occurred at FTX from the beginning, and senior management was aware of the shortfall as early as August 2022.

FTX.com is Ready to Restart

The now defunct cryptocurrency exchange FTX has sought to divide its creditors into various classes of claims, and, should the group agree to it, has given a mechanism for one class of claimants to revive the FTX exchange with outside investors.

The file , which was published Monday night, U.S. time, divides the claimants into different categories. Customers of its U.S. exchange come in second (referred to as “U.S. customers”), followed by those of its NFT exchange, followed by general unsecured claims, secured claims, and subordinated claims. The first group is comprised of claimants of FTX.com’s offshore exchange, also known as “dotcom customers.” Claims from Alameda’s lenders or business partners are included in general claims, whereas taxes and fines from penalties are subordinated claims.

According to “waterfall priorities,” the order of these claims will be determined, and each class will get a pro-rata payout from the remaining funds once the previous class has finished. The precise payout order is decided after discussions with stakeholders. Former FTX.com customers who fall under the Dotcom claims group have the option of pooling their resources to establish what is referred to as a “offshore exchange company” or a “rebooted” platform that is not accessible in the United States.

“Rather than all cash, the Debtors may determine that the Offshore Exchange Company remit non-cash consideration to the Dotcom Customer Pool in the form of equity securities, tokens or other interests in the Offshore Exchange Company, or rights to invest in such equity securities, tokens or other interests,” the document states, implying that the debtors may decide to forgo a cash payout in exchange for a stake in the new exchange.

Reboots of FTX had already been alluded to in billings from interim CEO John Ray III submitted in May, which include “FTX restart” or a “2.0 reboot”.

The anthropomorphic penguin-crypto Twitter legal avatar @Wassielawyer from Singapore pointed out that the suggested restructuring plan does not involve a payment for FTT holders.

In a complaint submitted in December against FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison, the SEC referred to the token as a security.

“No Holder of an FTT Claim shall receive any Distributions on account of its FTT Claim. On and after the Effective Date, all FTT Claims shall be canceled, released, and extinguished and shall be of no further force and effect, whether surrendered for cancelation or otherwise,” the document said.

According to the CoinMarketCap , the FTX Token price at the time of writing stood at $1.45 with a 24-hour trading volume of $42,270,037. FTX Token was up 7.06% in the last 24 hours. The current CoinMarketCap ranking is #215, with a live market cap of $476,700,596. It has a circulating supply of 328,895,104 FTT coins and a max. supply of 352,170,015 FTT coins.

FTX Reboot Bidding Process Officially Starting

As per the tweet that is referring to the newest WSJ article, FTX CEO John Ray III officially announced FTX reboot bidding process.

Chief Executive John J. Ray III, who took over after the company filed for bankruptcy in November, stated the company “has begun the process of soliciting interested parties to the reboot of the FTX.com exchange.”

According to people familiar with the situation, the defunct crypto company has been in preliminary discussions with investors about supporting the prospective relaunch of the FTX.com exchange through mechanisms such as a joint venture. These sources claimed that as part of any restart, FTX would probably rebrand.

FTX’s native token FTT, which was boosted by the most recent news, increased by over 39%  on Thursday to reach the seven-week high of $1.73, according to CoinMarketCap.

According to the sources , there have been discussions about compensating some current clients, maybe by offering them shares in any reformed company.

Allegedly, the blockchain technology company Figure has expressed interest in supporting the reactivation of FTX. The figure was a member of an investment group that attempted to revive Celsius Network, another defunct cryptocurrency company but lost to a group supported by Fortress Investment Group.

Knowing parties claim that this week is the deadline for other interested parties to submit their early signals of interest to the firm and its advisers if they wish to assist with financing or take part in the revival of FTX.

Developing Restructuring Plan Under John Ray III

In January this year, Ray said, despite allegations of criminal activity at FTX, consumers and other stakeholders believed the exchange’s business model to be fundamentally sound. Ray also announced the formation of a task group to investigate the possibility of the exchange’s reactivation.

The corporation hasn’t made any mention of restarting its U.S. exchange, which had been a relatively minor component of its operations. Prior to now, U.S. citizens were prohibited from trading on FTX’s global market, albeit some did so through offshore accounts.

In the hopes that it will be a better outcome for its millions of clients than shutting down, FTX is working to develop a restructuring plan that keeps its flagship exchange operational.

However, FTX’s attempts to relaunch will take place while U.S. regulators, who have criticized the business models of some of the biggest corporations in the crypto sector, work to control the sector.

In a related development, the company’s efforts to recoup billions of dollars in improperly spent client funds as part of the restart plan are running into significant difficulties.

According to Thomas Braziel, partner at 507 Capital, a fund that has become a creditor to insolvent crypto companies like FTX and Celsius after purchasing tens of millions of dollars worth of customer claims, “I find the restart of FTX a pretty tall order given the recent enforcement actions against U.S. crypto companies and the major reputational damage FTX has suffered,” he said.

After a thorough examination of the business’s finances, discussions on the resumption of FTX have begun.

Investigations led by Ray revealed new information about how FTX used customers’ money without their knowledge, investing millions of dollars in everything from a little-known cryptocurrency hedge fund called Modulo Capital to the publicly traded stock market app Robinhood Markets. Modulo Capital was founded by friends of FTX co-founder Sam Bankman-Fried.

In addition, Ray and his legal and financial advisors have warned that recovering a large portion of the stolen funds would be difficult.

Based on $2 billion in assets and $11 billion in unpaid customer accounts, Ray’s team undertook a forensic examination of FTX’s assets in the first few months after taking over. This analysis revealed a gap of almost $9 billion owing to consumers on the company’s major international exchange.

Is Reviving Collapsed Exchange Good Idea or Not?

The operators of FTX have been selling assets and attempting to recoup donations and investments made using customers’ money in order to close that gap. Many of Bankman-Fried’s investments, too, are turning out to be significantly less valuable than what FTX paid for them in the months prior to the exchange’s collapse.

LedgerX, a U.S. derivatives exchange, was recently approved for sale by the firm for $50 million, a significant discount from the $298 million paid for it.

FTX is attempting to recover money it spent last year purchasing stock trading platform Embed for $240 million. Managers at FTX believe that Embed may be sold for no more than $1 million at this time.

The idea to revive FTX raises some optimism. In general, when the fundamental business is restarted as opposed to being sold for parts in bankruptcies, creditors fare better. This is particularly accurate with FTX: FTT, FTX’s proprietary token, which consumers used to aid in payment for transactions and trade with one another on the platform, is one of the largest pools of crypto assets that may be allocated to customers.

The FTT tokens can become worthless if the exchange isn’t revived because they have no use at all. The business and Bahamian liquidators, who in November took almost 195 million FTT tokens from the exchange’s accounts, are still at odds.

A framework for a deal with the Bahamian liquidators has fallen through, resulting in fresh legal disputes regarding who should be the owner of the assets.

The lawsuit and reorganization initiatives are pricey. The business had accumulated around $200 million in professional costs as of April, which must be paid before any consumers before any Chapter 11 exit.

On schedule, FTX will release a formal reorganization plan in July that will outline the company’s initial efforts to make creditor payments.

Judge John Dorsey of the U.S. Bankruptcy Court in Delaware said recently in court: “Let’s try and find a way to cooperate.” “With each passing day that we are in bankruptcy, the assets of our customers deteriorate.”

FTX Collapse – A Timeline

  • Following a CoinDesk investigation detailing possible leverage and solvency issues concerning FTX-affiliated trading firm Alameda Research, FTX crashed in early November 2022.
  • The unstable cryptocurrency market was shaken by the collapse of FTX; at the time, it lost billions and was valued at less than $1 trillion.
  • In November 2022, FTX experienced a liquidity difficulty and sought financial assistance; rival exchange Binance briefly discussed purchasing the company but immediately backed off.
  • On November 11, 2022, FTX’s CEO resigned and the business declared bankruptcy.
  • In the hours that followed, FTX may have been the victim of a hack in which tokens valued at hundreds of millions were taken.
  • Sam Bankman-Fried, the founder and former CEO of FTX, was detained in The Bahamas and extradited to the US in late December. On January 3, 2023, he entered a plea of innocence on all counts.
  • On May 10, 2023, IRS filed 45 claims worth $44 billion against FTX
  •  Also, in May this year, SBF’s lawyers filed motions to have the US government’s fraud allegations against him dismissed.
  • On Tuesday, June 27, a federal court denied Sam Bankman-Fried’s request to overturn the majority of the U.S. government’s criminal case against him