FTX, a defunct cryptocurrency exchange, is reportedly considering a relaunch, according to lawyers representing FTX debtors. During a hearing on April 12th, the restructuring team revealed that they have collected $7.3 billion in liquid assets. Andrew Dietderich of Sullivan & Cromwell stated that there are various opinions being deliberated regarding the matter. The law firm has been investigating tax implications and “long-term options.”
The restructuring team has discovered $7.3 billion in liquid assets, and chief restructuring officer John J. Ray III and his team have published a 43-page interim report. The report outlines several control failures in the areas of finance and accounting, digital asset management, and management and governance. In particular, “a handful of employees had, among them, virtually limitless power to direct transfers of fiat currency and crypto assets and to hire and fire employees, with no effective oversight or controls to act as checks on how they exercised those powers.”
The report also notes FTX failed to implement basic, widely accepted security controls to protect cryptocurrency assets. During the search for information, FTX debtors had to scrutinize Quickbooks records, senior officials’ laptops, and Slack conversations. The report notes that certain entities in the FTX Group used Quickbooks as their general ledgers. It also points out that senior FTX officials “commingled and misused corporate and customer funds” and “lied to third parties.”
This idea of rebooting the exchange was first mentioned in January when Ray confirmed that he was open to the possibility of reviving FTX. After news of a possible relaunch was made public, FTX’s crypto token, FTT, rose 70% against the U.S. dollar from $1.30 before the court hearing to the current $2.44 per unit. A large number of FTT was illicitly released from FTT’s main deployer address last year. While the bankrupt exchange holds FTT, it is highly consolidated, with the top ten wallets holding 94.19% of the circulating supply.
The possibility of FTX relaunching has sparked debate in the cryptocurrency community. Some argue that the exchange should be given a second chance, while others believe it is time to move on from FTX. It remains to be seen whether FTX will be able to address the control failures and security issues that led to its downfall and regain the trust of the cryptocurrency community.