FTX, the failed crypto company embroiled in a scandal involving the misappropriation of nearly $9bn in customer funds, is in preliminary discussions with investors about resurrecting its international cryptocurrency exchange, FTX.com.
The Wall Street Journal reported that, according to John J. Ray III, the CEO who assumed control when FTX filed for bankruptcy in November, the company has begun the process of soliciting potential partners for the exchange's reboot.
Insiders familiar with the matter revealed that FTX is exploring options for a rebranding strategy as part of the relaunch. Additionally, discussions are underway regarding possible compensation for existing customers, potentially involving them in the reorganized entity through equity stakes.
Figure, a blockchain technology company, has allegedly expressed interest in supporting the revival of FTX. Figure was previously part of an investment group that vied for the opportunity to restart Celsius Network, another defunct crypto business, but ultimately lost to a consortium led by Fortress Investment Group.
While FTX's efforts to revive its operations are ongoing, uncertainties loom large. Regulatory bodies in the US, critical of the business models of major players in the crypto sector, are tightening their grip on the industry with lawsuits against major crypto players Coinbase and Binance.
Furthermore, the company faces considerable challenges in recovering the billions of dollars in misappropriated customer funds as part of its restart plan.
FTX's investigations into its financial situation, spearheaded by CEO John J. Ray III, uncovered new revelations regarding the misuse of customers' funds.
The company made multimillion-dollar investments without customer knowledge, including ventures with Robinhood Markets and Modulo Capital, a cryptocurrency hedge fund founded by FTX co-founder Sam Bankman-Fried.
Despite attempts to recover lost funds by selling assets and recouping investments made with customer cash, many of the investments initiated by Bankman-Fried before FTX's collapse are now worth significantly less than their initial cost.
To ensure a more favorable outcome for its customers, FTX's managers are striving to develop a reorganization plan that preserves the flagship exchange.
The revival of the exchange is particularly crucial, as it holds one of the largest pools of crypto assets, including FTX's in-house token, FTT, which could potentially be distributed to customers.
Nevertheless, FTX faces multiple hurdles. Disputes with Bahamian liquidators who seized 195m FTT tokens from the exchange's accounts and escalating litigation have complicated the situation. Moreover, the company has accumulated approximately $200m in professional fees, which must be settled before any progress can be made toward exiting bankruptcy.