FTX Abandons Exchange Revival Plan, Vows Full Repayment to Customers

FTX, the cryptocurrency exchange founded by Sam Bankman-Fried, has officially abandoned efforts to restart its operations. Instead, the company has chosen to liquidate all assets and return funds to customers, as confirmed by FTX attorney Andy Dietderich during a bankruptcy court hearing in Delaware on Wednesday.

FTX has been engaged in months-long negotiations with potential bidders and investors, but none were willing to commit sufficient funds to rebuild the exchange, Dietderich revealed.

This failure highlights a crucial reality—that FTX was not what it appeared to be. Dietderich asserted that Bankman-Fried never built the necessary technology or administration to sustain the company as a viable business.

Bankman-Fried, who has been convicted on fraud charges related to his operation of FTX, is now facing potential decades in prison.

Dietderich pulled no punches, labeling FTX as an “irresponsible sham created by a convicted felon” and stressing that the costs and risks of resurrecting the exchange were deemed prohibitively high.

Related: FTX Creditors Set to Receive $9 Billion Disbursement

FTX Focus on Liquidation and Customer Repayment

With the restart plans abandoned, FTX is pivoting towards liquidating its assets to repay customers whose cryptocurrency deposits were locked when the company filed for bankruptcy in November 2022.

The company has managed to recover over $7 billion in assets, and agreements have been reached with government regulators who are willing to wait until customers are fully repaid before pursuing approximately $9 billion in claims.

While FTX aims to pay all customers in full, the calculation for their repayment will be based on cryptocurrency prices from November 2022, during a period of prolonged market slump.

However, some customers have expressed dissatisfaction, claiming they are being short-changed, especially given the significant rise in bitcoin prices since November 2022.

Bankman-Fried’s Legal Woes and Admission of Mistakes

In November, a Manhattan federal jury found Bankman-Fried guilty of seven counts of wire fraud and conspiracy to launder money. Prosecutors accused him of siphoning “stolen funds” to enrich himself, cover high-risk investments, and fund a luxurious lifestyle that included political contributions, celebrity endorsements, and personal expenses like $200 million in Bahamas property.

UPDATE: Court filings show that FTX has $7 billion in assets, including 38 properties in the Bahamas worth $200 million.

— Coinwaft (@coinwaft) September 11, 2023

The fraud, extending from 2019 to FTX’s collapse in November 2022, involved swindling customers out of approximately $10 billion. Bankman-Fried admitted to “large mistakes” in managing the exchange during his testimony, including the failure to establish a risk management team.

With a sentencing hearing set for March 28, he faces a lengthy prison term, marking a significant chapter in the downfall of FTX and its founder.

Related: The Legal Saga Continues: FTX’s Former CEO Denied Sentencing Extension