Bankrupt FTX Confirms The Plan To Relaunch The Crypto Exchange, FTT Surges Over 12%

• FTX unveils a draft creditor-repayment plan as part of its bankruptcy, proposing to settle customer claims in cash and eliminate its digital token, FTT.

• The plan organizes creditors into different classes, with one class potentially restarting the exchange with third-party investors if agreed upon.

• FTX emphasizes that the plan is subject to change and aims to submit an amended plan in the fourth quarter of this year.

The wind-up of

crypto exchange

FTX is set to be “very expensive by any measure” with professional fees already amounting to over $200 million, a court-appointed examiner said in a filing made earlier.

Katherine Stadler, a bankruptcy attorney appointed in March to check fees, said lawyers and other professionals had already racked up nearly 35,000 billable hours, equivalent to four solid person-years of work, by the end of January.

“These proceedings appear on track to be very expensive by any measure,” said Stadler, citing costs that already amount to 2% of estate assets and 10% of reported cash, with 46 of the 242 attorneys assigned to the case charged over $2,000 an hour.

“What makes these cases extraordinary… is the largely unregulated financial system in which the Debtors (and other similar financial technology companies) operate,” she said, citing the “nonexistence of even the most basic corporate governance” at Sam Bankman-Frieds exchange, a description which echoes criticism leveled by new CEO John J Ray III.

“Very few firms could have accomplished what these professionals accomplished in 90 days…transforming a smoldering heap of wreckage into a functioning Chapter 11 debtor-in-possession,” Stadler said, describing the period immediately following the declaration of bankruptcy as “an ‘all hands on deck’ crisis.”

While broadly content, Stadler called for some of the fees to be slashed, and she asked lead counsel Sullivan & Cromwell to reduce its $42 million bill by some $650,000, for deficiencies such as overstaffing, excessive meetings and vague paperwork.

The plan includes settling customer claims in cash and proposing the elimination of its digital token, FTT.

According to court papers filed by FTX, the proposed plan involves organizing creditors into distinct classes of claimants. One noteworthy aspect of the plan is the provision of a pathway for a specific class of claimants to potentially revive the exchange through collaboration with third-party investors, pending approval from the group.

To determine creditor repayments, the plan establishes three “recovery pools”: assets linked to FTX.com customers, assets linked to FTX US customers, and assets not directly connected to the exchanges. Almost all creditor classes, as per the companys expectations, will be deemed impaired, meaning they may not be fully compensated.

Notably, the plan proposes no recovery for FTT tokens due to their “equity-like characteristics.” Advisers for the exchange cited that equity is typically wiped out in US bankruptcy reorganizations. The FTT token had been previously classified as a security by the SEC in a complaint filed against FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison.

FTX emphasized that the plan is still in its early stages and remains subject to change. In a statement, FTX Chief Restructuring Officer John J. Ray III expressed the companys commitment to delivering the plan promptly. The company plans to collaborate with creditors over the next few months and intends to submit an amended plan in the fourth quarter of this year.

The possibility of an FTX reboot had been hinted at earlier, with billings from interim CEO John Ray III mentioning “FTX restart” or a “2.0 reboot” in May filings.

Its important to note that the proposed creditor-repayment plan is still under review and may undergo further changes as it progresses through the bankruptcy process.

Following this news, FTT spiked more than 12% on the day with excitement in the face of the quieting market.

FTT price chart. Source: TradingView

Besides the exchange that was once the empire of Sam Bankman-Fried, Binance Japan has also officially launched in Japan today. These events mark the recovery of centralized trading platforms that have been struggling since the end of last year.

However, if FTX has indeed announced plans to relaunch their crypto exchange in the future, it would be essential to evaluate the reasons behind the decision and the improvements they aim to make. The conclusion would depend on various factors such as the current state of the crypto market, the company's reputation, the competitiveness of the relaunched platform, and the potential impact on the broader

cryptocurrency

ecosystem.