FTX crypto exchange went through bankruptcy reorganization in 2022, and its founder SBF resigned and was prosecuted, becoming the largest financial crime in history. Less than a year later, the new CEO John J. Ray III announced on Wednesday (June 28) that the exchange would be restarted, and the FTT platform coin rose by more than 40% upon hearing the news.

The effort will face significant challenges as regulators tighten their oversight of the industry and the company moves through bankruptcy proceedings. John Ray III said: “We have begun soliciting interested parties with the aim of restarting the FTX International Exchange.”

After the news came out, the FTT platform price rose by more than 40%, and then fell slightly, with the Asian market trading at $1.78 on Thursday.

Indeed, FTX’s restart plan brings hope to the cryptocurrency community. Generally speaking, bankruptcy creditors are in a better position when the company in question is restarted rather than sold for parts. This is especially true for FTX, where one of the largest pools of crypto assets the company can distribute to customers is the FTT platform token, which is FTX’s own internal token that customers use to help pay trading fees and trade with each other on the platform.

“Without a revitalization of the exchange, the FTT token may have no use case and may ultimately become worthless.”

The Wall Street Journal quoted people familiar with the matter as saying that the cryptocurrency company has been in early talks with investors to discuss supporting the possible restart of the FTX exchange through structures such as joint ventures. FTX may be renamed as a condition of any restart, these people said.

“FTX will need to rebrand in any relaunch, and in addition, it has stated that it hopes existing users will be able to participate in the relaunch content. FTX will also need to answer regulatory compliance issues,” the Watcher.Guru report mentioned.

With the change in leadership, it will be interesting to see how a new entity will distance itself from the damage done by FTX. However, it is certain that it will be difficult to escape the shadow of the founder SBF's explosion.

The talks include possible compensation for certain existing customers, possibly by offering them shares in any reorganized entity, the people said. Blockchain technology company Figure has expressed interest in helping restart FTX, and is part of an investor group that bid for the rights to restart Celsius Network, another bankrupt crypto business, but ultimately lost to a consortium backed by Fortress Investment Group.

Other parties that may want to help finance or participate in FTX's relaunch must submit preliminary expressions of interest to the company and its advisers this week, people familiar with the matter said.

Thomas Braziel, partner at 507 Capital, said: “Given the recent law enforcement actions against U.S. cryptocurrency companies and the significant reputational damage suffered by FTX, I find restarting FTX to be a fairly difficult task.” It is worth noting that 507 Capital is a has become a fund for creditors of bankrupt cryptocurrency companies.

In January of this year, John Ray III told the Wall Street Journal that despite FTX’s alleged criminal conduct, customers and other stakeholders said the exchange’s business model was fundamentally viable and that he was setting up a special task force group to discuss the exchange’s restart.

FTX is trying to put together a restructuring plan to keep its flagship exchange alive, hoping that this will be a better outcome for its millions of customers than shutting down. But as U.S. regulators intensify their crackdown on cryptocurrencies and amid new allegations of past misconduct by FTX, participants in the bankrupt exchange say a restart is far from guaranteed.

FTX’s restart efforts come as U.S. regulators criticize the business models of some of the crypto industry’s biggest companies, including exchanges like Binance and Coinbase, and move to rein in the industry.

Todd Phillips, a researcher at the Roosevelt Institute, an American think tank, said that although many of the world’s cryptocurrency exchanges operate in offshore jurisdictions such as the Bahamas, there are multiple ways in which U.S. regulators may have jurisdiction over foreign operations.

Louise Abbott, a partner at British law firm Keystone Law, which represents some clients whose funds are trapped on the FTX exchange, said: "FTX still has a long way to go in raising funds, paying off debts and earning trust."

To close the $9 billion shortfall, FTX managers have been selling assets and seeking to recoup donations and investments made with client cash. However, it turned out that many of the investments made by SBF in the months before the exchange collapsed were worth far less than the price paid by FTX.

The company recently received approval to sell U.S. derivatives exchange LedgerX for $50 million, a fraction of its original purchase price of $298 million. FTX is trying to recoup funds from stock trading platform Embed, which it acquired for $240 million in 2022. Today, FTX managers estimate that Embed will sell for no more than $1 million.