Bankrupt crypto exchange FTX may resume work. The new CEO of the platform, John Ray, said in an interview with The Wall Street Journal that he admits such a possibility, writes RBC Crypto.
When FTX collapsed in November 2022, triggering a collapse in the crypto market and a series of new problems for the major players in the industry, Ray took over the company and engaged in its bankruptcy process, while studying its surviving assets. According to him, now a special working group under his leadership is studying the possibility of restarting FTX.
When the exchange’s business is restarted, affected customers can expect to receive a larger refund than in the case of the liquidation of its assets or the sale of the platform, Ray explains his decision. This week, FTX lawyers disclosed the exchange’s $3.5 billion of surviving liquid assets.
FTX founder Sam Bankman-Fried ironically wrote on Twitter (the social network is blocked in Russia) that, they say, he is glad of Ray’s initiative. He also accused Ray of blocking any attempts to bring the exchange back to work for several months. Bankman-Fried continues to insist on the viability of the American division of the exchange – FTX US, which he once again recalled in a series of tweets.
Bankman-Fried is accused of stealing billions of dollars belonging to the exchange’s clients to pay off the debts of his own fund, Alameda Research. This fund also failed – along with the exchange and a group of affiliated companies. After the publication of the WSJ material, the price of the native FTX token (FTT), which continues to be traded on crypto exchanges, despite the bankruptcy of FTX, soared by more than 30%.
According to the expert, to revive the FTX business, new investors will be needed to help avoid bankruptcy and invest in a marketing campaign to attract users.
An incentive system for those who have large sums stuck on FTX will also be needed, as this is “the most obvious backbone of regular customers,” Nekrasov adds. In his opinion, FTX may issue new tokens corresponding to debt obligations on deposits, which will be gradually redeemed as funds appear on the exchange.
Nekrasov recalls that a similar experience took place on the Bitfinex exchange with its BFX debt tokens, which were credited to affected users after a major hacker attack in 2016. Such a move helped Bitfinex fully pay off its debts to customers a year after the incident.
In the case of FTX, even a partial refund could take years, as Bankman-Fried “deprived hundreds of thousands of investors of their money,” said Vladislav Antonov, a financial analyst at BitRiver, who estimates the probability of recovery of the exchange’s business at 20%. In his opinion, a complete rebranding of the exchange could also help to partially regain the confidence of investors and traders who “FTX is blacklisted.”
It may take from one to two years to restore FTX until all obligations are paid, Dmitry Machikhin, the founder of the BitOK service, agrees. Probably, the FTX restart can only happen for the US market, and only with full compliance with the requirements of local regulators, the expert admits.
As the experience of Bitfinex shows, user confidence and trading volumes can be restored, but only partially, Roman Nekrasov notes. Once Bitfinex was the largest crypto-exchange, but after the hack and the emergence of a major competitor in the face of Binance, the platform has not even been among the top three world leaders for a long time. FTX may indeed return to the game, but it is unlikely to achieve the same credibility. The new exchange team will have to first pay off the debts to users and prove that it “does not use the same fraudulent methods” as the previous one.
“Token went to the people”
The native token of the FTX exchange, despite its bankruptcy, continues to be traded on leading crypto exchanges, including Binance, KuCoin or Huobi. Its price doubled after the New Year holidays, and its market cap exceeds $773 million, according to CoinMarketCap. After the FTX crash, none of the trading platforms delisted the token.
The short-term rally of the FTT token is a speculative activity that does not guarantee a further recovery of the asset, Antonov believes. There is interest in FTT among traders who are prone to increased risk and work with leverage, BitRiver analyst notes. On Binance, the FTT token is only traded in tandem with the exchange’s own stablecoin (BUSD) so that it can “keep the situation under control in the event of a new collapse” and prevent the impact on the stability of the market and other stablecoins, Antonov clarifies.
According to Machikhin, “the token has gone to the people,” so it will continue to be traded. A similar situation occurred with the NEM project, whose coin (XEM) has been trading on the crypto market for several years, despite the bankruptcy of its developers. Another example is the failed EOS project, which “has been in the community for a long time and is trading on its own.” FTT, most likely, will not go anywhere, and “it is unlikely that it will be divided”, because it still has good volumes, the expert believes.