Bankrupt FTX won't be restarting, but former customers will get money back in full

Bankrupt cryptocurrency exchange FTX said it plans to repay former customers in full even though it has abandoned plans to restart the exchange. 

"We currently anticipate that we will have sufficient funds to pay all allowed customer and creditor claims in full," FTX lawyer Andrew Dietderich told a judge on Wednesday during a hearing.

FTX, which was once led by former CEO Sam Bankman-Fried, filed for bankruptcy in late 2022. Bankman-Fried was found guilty of defrauding customers, lenders, and investors of FTX a year later.

Dietderich also said FTX does not plan to re-start the platform. 

Businesses FTX bought for hundreds of millions of dollars proved to have little value, and there are not many interested buyers, the lawyer said.

No investors

"A related disappointment is FTX 2.0. We still have valuable customer data and information to monetize," Dietderich said. "But after an exhaustive effort, no investor is ready to commit the needed capital to a restart of the offshore exchange." 

FTX CEO John J. Ray III  told the Wall Street Journal in June that the company has "begun the process of soliciting interested parties to the reboot of the FTX.com exchange." FTX would have likely rebranded as part of any restart, the news outlet said at the time, citing people familiar with the discussions.

A lawyer representing the official committee of unsecured creditors said they appreciate the update from FTX.

The lawyer called it a “watershed moment for the debtors.” A disclosure statement will be filed in February that will include likely payment in full of customers’ claims, but there may be a few caveats, the lawyer said.

'Petition date values'

“That payment in full is based on the petition date values of those claims. Many of those claims are premised upon currencies, which declined dramatically in value in that tumultuous period leading up to the petition date,” the lawyer said.

Many customers and creditors “won’t feel like that’s true payment in full from where they started,” the lawyer added.

“But we recognize that the petition date is the date that needs to be used,” the lawyer continued.

Later in the hearing, the judge approved a motion from the debtors that would convert claims in digital assets to U.S. dollars. 

“Based on the evidence presented and the argument provided in the papers and the hearing, I find that estimation is appropriate and the debtors’ methodology for estimating the claims is fair and reasonable,” the judge said. 

(Updated with judge approving a motion at 4:40 p.m. ET)