Original article: "FTX restart, is it not just a whim?"

Author: Azuma, Odaily

 

In the early hours of April 12, the story of bankrupt exchange FTX took a dramatic turn.

On Wednesday, Andy Dietderich, a lawyer from FTX's law firm Sullivan Cromwell, said at a court hearing in Delaware that FTX has recovered $7.3 billion in assets, including $2 billion in cash, $4.3 billion in Class A cryptocurrencies, $300 million in securities, $600 million in receivable investments, etc.

In addition, FTX is considering reopening the exchange at some point in the future. One possible option is for FTX's creditors to convert their claims into shares in the reopened exchange.

Stimulated by this news, FTT rose strongly, breaking through 3 USDT at one point. Although it has now fallen back to around 2.5 USDT, the increase is still more than 90%.

 

This is not the first time that a restart has been mentioned

 

Although the incident happened suddenly, this is not the first time that FTX-related personnel have considered restarting the platform. It is just the first time that this potential option has been raised in court.

According to the Wall Street Journal, as early as January this year, FTX's new CEO John J. Ray III expressed his openness to restarting the exchange business in his first public interview. John J. Ray III mentioned at the time that he had set up a special working group to explore how to restart FTX. Although the exchange's previous management team was accused of criminal misconduct, some customers still admired FTX's technology very much, so they tended to and believed that restarting the exchange was valuable.

Since then, the law firm representing FTX’s Official Committee of Unsecured Creditors has held several discussion meetings on the theme of “restarting the exchange,” and some creditors have shown a very positive attitude towards restarting the exchange’s business.

According to The Block, Sunil Kavuri, a creditor with seven-figure assets trapped in FTX, once said: "If run properly, the underlying business can make money. So for me, it makes no economic sense to dissolve a profitable company. Restarting it will generate revenue and compensate users."

Another anonymous creditor, @AFTXcreditor, agreed: “FTX is a highly profitable exchange, and it was just taken away by a completely unprofitable hedge fund (referring to Alameda). It makes perfect sense to me to refinance this profitable business to resume activities and generate profits and equity value that can better compensate creditors.”

Most importantly, some creditors who actively tracked FTX's bankruptcy and liquidation trends found that after analyzing the financial details submitted by FTX to the court, the exchange had also discussed some topics about restarting with the legal team. The specific topics discussed included:

  • Create mockups to test user experience;

  • Restart the security analysis of the exchange;

  • Restart tax analysis of exchanges.

Here is a small anecdote. The reason why these discussions can be seen in the financial details is that FTX needs to pay consulting fees based on the length of time for these discussions with the legal team, and Sullivan Cromwell received fee income of up to $13.5 million from FTX in February.

 

Restart, just imaginary for now

 

Although many relevant people believe that restarting FTX may indeed have the opportunity to help creditors recover higher compensation, based on the current situation, this is only a hypothesis for the time being.

First of all, it is important to emphasize that the reason for the discussion of restarting at this stage is that FTX's financial situation has improved as it "recovers" more assets. However, the so-called "recovery" is actually mainly due to the overall rise in the cryptocurrency market (most assets belong to Class A crypto assets), so the value of $7.3 billion still has a large possibility of fluctuation, in other words, its financial situation is also unstable.

Secondly, Dietderich has only proposed this suggestion. There are still many unresolved issues about whether and how to implement this plan. One of the most critical issues is that restarting the exchange business will inevitably require huge funds. Should these funds be directly used from FTX's existing assets or raised through third-party capital financing? This is also the biggest point of contention within FTX about "restarting".

As Dietderich himself said, restarting FTX is just one of the possibilities for the future, and any current option is far from the final outcome.