Bankrupt crypto exchange FTX could resume operations, says new boss

Can it help recover more value?
Ameya Paleja
Sam BAnkman-Fried and John Ray
Sam BAnkman-Fried and John Ray

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John Ray, the new CEO of the cryptocurrency exchange that filed for bankruptcy In November last year, has now said that the firm could restart operations, BBC reported. Ray has set up a task force to look into possibilities of what could be done to recover assets for investors, and restarting FTX.com was one of them.

Founded by Sam Bankman-Fried, FTX, at its peak, was valued at over $32 billion not so long ago. However, the 'crypto-winter' that set in last year after the U.S. Federal Reserve began increasing interest rates began affecting cryptocurrency companies, and FTX was one of the biggest to crumble.

As prices of cryptocurrencies began to fall, tokens such as TerraLuna and Terra USD collapsed in May. Sam Bankman-Fried (SBF), who was out there helping cryptocurrency companies from the fallout of the crash, found his firm in the dock soon and reached out for help from another cryptocurrency exchange, Binance.

Downfall, its own doing

Binance, which earlier appeared keen to help, quickly pulled itself out of FTX's problems after conducting its due diligence. As it turned out, SBF's trading firm, Alameda Research, was using an FTT, a token issued by FTX, as collateral as it tapped into the deposits made by investors at FTX. Still, SBF and the top executives went to extensive lengths to keep Alameda's liabilities off FTX's books.

Ray, appointed as the CEO after FTX filed for Chapter 11 bankruptcy, had previously said that he had never seen such a "complete failure of corporate controls" in his career spanning four decades and the high-profile case of Enron.

However, as per the legal process of the bankruptcy filing, a company can hash out a restructuring plan for all options available to maximize recoveries for creditors explored, a Bloomberg report said. This means that FTX could restart operations, which former CEO SBF, accused of defrauding customers and investors, agreed within a statement released through a spokesperson on Thursday.

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Market response to the news

Initial investigations into the FTX collapse had revealed that assets worth US$8 billion had been missing. Last week, the firm's attorney told the court that as much as US$5 billion in assets had been recovered.

Since the extent of losses investors face is not precisely known, the crypto exchange could be briefly opened to allow users to repatriate their funds. However, allowing it to resume operations could lead to a backlash, experts told Bloomberg.

Interestingly, the FTT token that was also at the center of the FTX collapse rose on the cryptocurrency exchange, Binance. While its valuation of $2.38 is far from its peak value of $84.18, the crypto markets reacted positively to the news that FTX could possibly resume operations.

At its peak, FTX was one of the most trusted cryptocurrency exchange platforms and only second to Binance in terms of transactions at its exchange. The news of a possible revival of FTX will also give hope to investors of Genesis, another crypto exchange that filed for Chapter 11 bankruptcy earlier today.