FTX’s collapse destabilized the global cryptocurrency market and left creditors with $11.6 billion in claims.
Now, lawyers for the bankrupt crypto exchange are considering giving the business another shot.
As of Wednesday (April 12), the FTX Debtors have recovered $7.3 billion in total assets.
Per recent court filings, and as discussed during a hearing Wednesday before federal bankruptcy judge John Dorsey, attorneys for FTX have been exploring the feasibility of rebooting the crypto exchange to help close the asset-claim gap and make FTX’s millions of customers whole again.
This comes just days after the FTX Debtors took harsh aim at the company’s operations and prior management team, including disgraced paper billionaire founder and alleged criminal Sam Bankman-Fried, in their latest report.
Bankman-Fried, 31, has maintained his innocence in the face of more than a dozen charges being levied against him.
“The situation has stabilized, and the dumpster fire is out,” Sullivan & Cromwell (S&C) attorney Andy Dietderich said during the hearing as he outlined S&C’s “Q2 2023 exchange restart assessment.”
FTX co-founder and engineering leader Gary Wang, who has admitted guilt to four criminal charges relating to the company’s collapse and is cooperating with federal authorities, gave “material assistance” to help debtors recover more assets, lawyers told the court.
Read also: FTX Debtors Say ‘Greed and Incompetence’ Triggered Collapse
FTX’s new CEO, John J. Ray, is tasked with creating as much value as possible for the bankrupt exchange’s creditors, including assessing whether undertaking a revival of FTX would create more value than just selling off the company’s existing assets.
A presentation filed with the Delaware court revealed that FTX’s “Category A” crypto assets have steadily increased in value as the broader cryptocurrency market shows signs of rebounding from 2022’s disastrous crypto winter, leading to a $900 million rise in FTX’s holdings.
Category A assets are crypto tokens with a market capitalization of at least $15 million, and an average daily trading volume of at least $1 million during the past 30 days.
Complicating matters is the fact that many of the alternative digital assets on FTX’s balance sheet are held in such large quantities as to make them impossible to sell on the open market without substantially affecting their values — making rebooting the exchange in such a way as to facilitate the mediation of their return to the market a potentially more attractive option than selling them outright.
Whether or not the new FTX CEO decides to move forward with bringing FTX’s operations back to life, S&C lawyers are billing for their hours of work assessing any restart’s viability.
Various time entries included in the firm’s more than $15 million February bill show line items such as, “analysis re: potential FTX exchange reboot,” “review notes re: potential security concerns re: potential FTX exchange reboot,” “email correspondence with various teams re: working groups for reboot project,” and much more.
Per the court filings, S&C is working with cyber technology and services company Sygnia as it irons out details involving the “reboot project.”
Neither Syngia nor S&C partner Nicole Friedlander, the lawyer listed on many of the reboot-related time entries, replied immediately to PYMNTS’ request for comment on the matter.
Dietderich, the lead attorney for FTX, told the court Wednesday that re-starting the exchange is one of many potential options being considered for the future of the company.
“There are as many opinions on this as there are professionals in this case, and that’s a lot,” he said about the army of professional services firms working to recoup as much value for FTX’s creditors while at the same time billing millions of dollars for their work.
“The services performed by S&C during the fee period represent one of the most complicated, multi-disciplinary exercises by any law firm in any area of law,” the firm stated in its invoice.
But if FTX were to restart, just how would it work? Any reboot would entail a litany of regulatory and compliance nightmares, and it remains unclear whether the investigative work undertaken was centered around a limited effort meant to assist in processing customer withdrawals, or whether the FTX Debtors are looking to relaunch the entire FTX business.
As PYMNTS reported Wednesday, the crypto industry as a whole is at a crossroads as it finds itself locked out of the U.S. banking sector — throwing into question just where, exactly, any reboot would be based.
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