FTX announces it will not pursue a relaunch, but pledges to fully compensate users.
Crypto exchange FTX said it plans to refund former customers in full, even though it has abandoned plans to restart the exchange. In a January 31 hearing in the United States Bankruptcy Court for the District of Delaware, FTX attorney Andy Dietderich, of the law firm Sullivan and Cromwell, stated that the exchange could “cautiously anticipate” the full refund to users and creditors, but added that this was “a goal” and not a “guarantee.” He said that “after an exhaustive effort,” there were no plans to relaunch FTX, dubbed “FTX 2.0,” in its current Chapter 11 bankruptcy plan.
Likewise, he pointed out that FTX has been negotiating for months with possible bidders and investors. However, neither was willing to put up enough money to rebuild the FTX exchange, adding that “The failed negotiations underscored the fact that FTX was never what it appeared to be, and founder Sam Bankman-Fried never built the underlying technology or management necessary to run the company as a viable business.”
FTX Rules Out Relaunch, but Plots Route to Full Compensation for Users
According to FTX’s attorney, the company will focus on liquidating its assets to pay customers whose cryptocurrency deposits were blocked when the company filed for bankruptcy in November 2022.
FTX has recovered more than $7 billion in assets to pay customers. And it has reached settlements with several government regulators who agreed to wait until customers have paid in full before trying to collect about $9 billion in claims.
Users Disappointed as Bankruptcy Judge Upholds Controversial Valuation Decision
Indeed, an attorney representing the official committee of unsecured creditors said they appreciate FTX’s update, calling it a “watershed moment for debtors.”
Still, a disclosure statement will be filed in February that will include the likely full payment of customer claims, but there may be some caveats: “That full payment is based on the values from the date of filing those claims. “Many of those claims are based on coins, the value of which decreased dramatically in that tumultuous period leading up to the date of the petition.”
The legal representative added that “Many clients and creditors will not feel that this is a true full payment from where they started. But we recognize that the petition date is the date that should be used.”
Long story short, FTX went bankrupt in November 2022 and since then, many people have been waiting for their funds to be recovered. Today, FTX was reported to have plans to distribute money to its users. FTX will give the value in USD to users instead of BTC or ETH, meaning they will get rid of their holdings. FTX users will get their money based on cryptocurrency prices in November 2022, meaning if someone had 1 BTC, they would get $16,872 instead of $43,300. As a consequence, several FTX clients have complained about this measure.
However, U.S. Bankruptcy Judge John Dorsey overturned customers’ complaints and approved FTX’s use of 2022 prices during the hearing, saying that US bankruptcy law is “very clear” that debts must be paid based on their value on the date a company filed for bankruptcy. In this respect, Dorsey said the following:
“I have no room for maneuver on this. The Bankruptcy Code says what it says and I am obligated to follow it.”
By Audy Castaneda
