KEY POINTS
- An FTX attorney said potential bidders and investors were unwilling to fund the exchange's planned revamp
- There have been concerns about calculating repayments based on crypto prices when FTX filed for bankruptcy
- FTX's founder was found guilty on all seven counts of fraud and related charges
Bankrupt cryptocurrency exchange FTX, run by Sam Bankman-Fried, said it dropped plans to restart operations and will instead liquidate all of its assets to repay customers whose accounts were affected when the exchange crumbled.
FTX attorney Andy Dietderich said during a bankruptcy court hearing in Delaware Wednesday that none of the potential bidders and investors FTX had been negotiated with in the past months were willing to put in funds to rebuild the collapsed exchange.
"FTX was an irresponsible sham created by a convicted felon. The costs and risks of creating a viable exchange from what Mr. [Sam] Bankman-Fried left in a dumpster were simply too high," Dietderich said.
He said the exchange was never what founder Bankman-Fried painted it to be and it didn't have the necessary organization or technology to operate as a viable business.
So far, the company has recovered more than $7 billion in assets to repay customers. It will now focus on liquidating assets for the repayment to customers whose crypto deposits at FTX were frozen when the company filed for bankruptcy.
FTX expects to repay all customers in full. However, the company has yet to calculate repayments based on crypto prices from November 2022, when FTX filed for bankruptcy, Dietderich said.
Some claimants have expressed concerns about the said process, arguing that they will be short-changed if calculations are made based on November 2022 prices as some crypto prices have since made significant jumps.
The exchange previously warned of a possible delay in its repayment process to customers due to the proposed $24 billion tax bill by the U.S. International Revenue Service (IRS). FTX called the IRS' tax claim "meritless," adding that it would have a huge impact on the funds it clawed back for the purpose of repaying clients.
Bankman-Fried, who founded FTX in 2019, was found guilty early in November 2023 on all seven counts of fraud, embezzlement and criminal conspiracy following five weeks of trial. He is faced with up to 110 years in prison, with his sentencing scheduled for March 28.
In closing arguments, prosecutors called on the jury to find guilty a 31-year-old "ambitious" businessman who had "the arrogance to think that he could get away with a fraud."
Several close associates of the fallen crypto king revealed during trial how Bankman-Fried stole billions from FTX clients to prop up Alameda Research, his personal hedge fund.
In December, District Judge Lewis Kaplan, who presides over Bankman-Fried's case, denied the former crypto tycoon's motion to extend his sentencing, marking another of his losses since FTX collapsed and brought about the so-called "crypto winter."
