Crypto Quill

FTX, the crypto exchange founded by Sam Bankman-Fried, has given up on its plans to restart its operations after months of negotiations with potential investors and bidders. The company’s lawyer, Andrew Dietderich, announced on Wednesday that FTX will focus on liquidating its assets and returning funds to its customers, who have been locked out of their accounts since the company filed for bankruptcy in November 2022.

FTX was a sham created by a convicted felon, lawyer says

Dietderich said that none of the parties that expressed interest in FTX were willing to put in enough money to rebuild the exchange, which he described as “an irresponsible sham created by a convicted felon”. He said that Bankman-Fried, who has been found guilty of wire fraud and money laundering charges, never built the underlying technology or administration necessary to run the company as a viable business.

“The costs and risks of creating a viable exchange from what Mr Bankman-Fried left in a dumpster were simply too high,” Dietderich said.

Bankman-Fried, 31, is facing decades in prison for siphoning “stolen funds” from FTX customers to enrich himself and cover his high-risk investments and lavish lifestyle. He spent hundreds of millions of dollars on political contributions, celebrity endorsements, Bahamas property, and loans to his other company, Alameda, which faced an $8 billion budget shortfall as the crypto market crashed in 2022.

FTX expects to pay all customers in full, but at November 2022 prices

Dietderich said that FTX has recovered over $7 billion in assets to repay its customers, and that it has reached agreements with government regulators who have agreed to wait until customers are fully repaid before attempting to collect on about $9 billion in claims. He said that FTX expects to pay all customers in full, but based on the cryptocurrency prices from November 2022, when the market was suffering a prolonged slump.

This means that customers who deposited cryptocurrencies that have since appreciated in value will not receive the full amount of their holdings. For example, the price of bitcoin has risen to about $43,300 from its November 2022 price of $16,872. Dozens of customers have complained that they are being shortchanged by the use of November 2022 prices.

Dietderich said that this method of repayment was necessary to ensure fairness and avoid litigation. He said that customers who disagree with the calculation can file an objection with the bankruptcy court.

FTX’s liquidation marks the end of a turbulent saga in the crypto industry

FTX’s decision to liquidate its assets and repay its customers marks the end of a turbulent saga in the crypto industry, which has seen many exchanges face regulatory scrutiny, security breaches, and customer lawsuits. FTX was once one of the largest and most popular crypto exchanges in the world, boasting over 10 million users and $1 trillion in trading volume in 2021. It was also known for its innovative products, such as tokenized stocks, futures, and options.

However, FTX’s downfall began in October 2022, when the US Securities and Exchange Commission (SEC) filed a lawsuit against the company and Bankman-Fried, accusing them of operating an unregistered securities exchange and defrauding investors. The SEC alleged that FTX sold unregistered securities, such as tokenized stocks and futures, to US customers without complying with federal securities laws. The SEC also claimed that FTX manipulated the prices of its products and failed to protect customer funds from hackers and insiders.

Following the SEC’s lawsuit, FTX faced a wave of legal actions from customers, creditors, and regulators from other jurisdictions, such as the UK, Hong Kong, and Singapore. The company also suffered a massive cyberattack in November 2022, which resulted in the loss of over $2 billion in customer funds. FTX then filed for bankruptcy protection in Delaware, citing insolvency and imminent threats to its business.

Since then, FTX has been trying to find a way to revive its exchange and resume its operations, but to no avail. The company’s creditors and customers have been waiting for months for a resolution, while the crypto market has rebounded from its 2022 lows. FTX’s announcement on Wednesday dashed the hopes of many who were hoping to recover their funds and access their accounts.