FTX is planning to reboot its flagship international cryptocurrency exchange, a move that will likely face major opposition from regulators, who have heightened the scrutiny of crypto firms. The bankrupt crypto exchange has been holding discussions with investors about supporting the revival of the FTX.com exchange through varied structures, including a joint venture, the Wall Street Journal reported.
FTX “has begun the process of soliciting interested parties to the reboot of the FTX.com exchange,” said CEO John J. Ray III. He took over the CEO role in November when the exchange filed for bankruptcy following a massive collapse that shook the entire crypto market. FTX co-founded by Sam Bankman-Fried, failed after customers withdrew billions of dollars, hurting its liquidity.
The ongoing talks include possible compensation for certain existing customers possibly via stakes in the reorganized firm. Reportedly, Blockchain technology company Figure is keen to help in FTX’s revival. Other entities that intend to participate in the reboot of FTX or are interested to finance need to inform the company and its advisers this week.
Revival Difficult Amid Regulatory Crackdown
The news of FTX’s efforts to revive the crypto exchange comes at a time when the U.S. Securities and Exchange Commission (SEC) and other regulators have intensified the scrutiny of crypto firms to safeguard investors’ wealth. Last month, the SEC sued crypto exchanges Binance (BNB-USD) and Coinbase Global (NASDAQ:COIN) for allegedly operating illegally as securities exchanges.
Thomas Braziel, a partner at 507 Capital, said, “I find the restart of FTX a pretty tall order given the recent enforcement actions against U.S. crypto companies and the major reputational damage FTX has suffered.” 507 Capital has emerged as the creditor to bankrupt crypto companies, including FTX and Celsius, after buying massive customer claims, amounting to tens of millions of dollars.
The revival seems tough as new information about past misconduct at FTX is emerging. Probes overseen by Ray revealed new details on how the crypto exchange spent customer funds without their knowledge. Keeping customers in the dark, FTX allegedly made investments in the stock market app Robinhood Markets (NASDAQ:HOOD). It also invested in Modulo Capital, a crypto hedge fund started by Bankman-Fried’s associates.
FTX will be presenting a formal reorganization plan next month, which would comprise details on how the company intends to repay creditors.
Meanwhile, FTT-USD, FTX’s in-house token, soared following the news of the potential reboot. It has risen over 16% in the past 24 hours.
