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John Martin 21 Sep 2023 ◦ 9 min read

The Ftx 2.0 Relaunch (And Other Second Chances)

The Ftx 2.0 Relaunch (And Other Second Chances)

Plans to revive bankrupt cryptocurrency exchange FTX could soon become a reality, as new CEO John Ray Third is developing a reboot plan that aligns with recent lawsuits.

In the May 22 court filing, the FTX team shared a compensation report highlighting Ray's work during his Chapter 11 bankruptcy. The review report outlines Ray’s actions to ensure that the debtor has the best interests. However, mentions of the FTX reload have garnered attention in the crypto community.

A proposal to re-launch a new iteration of the now-defunct FTX Group cryptocurrency exchange is anticipated as early as the next year. This could potentially revive the market that has struggled since the collapse of the platform.

An official presentation submitted to a Delaware court disclosed that the FTX has reached over 75 trading members since May to evaluate the industry’s interest in contributing to the exchange's revival. Several parties submitted bids to the estate managers. These bids are currently undergoing due diligence and information-sharing. September 24 was the deadline for new bids.

In January, Ray initially discussed restarting troubled cryptocurrency exchanges. A bankrupt cryptocurrency exchange reportedly discovered $5.5 billion in liquid assets. The new CEO worked on a revitalization plan with creditors. In April, a previous report stated that the exchange had regained $7.3 billion in assets, and the FTX team devised a plan to renew the exchange by Q2 2024.

Recent court filings have confirmed that the reload plan is being considered. The document states that the new CEO arranged a sequence of meetings with creditors and debtors in the previous month.

Some key meeting topics included exchange structuring, re-launch planning, and material finalization for the crypto-exchange reboot FTX 2.0. This document indicates that the FTX has entered the trading process.

In addition, the FTX's relaunch news caused the price of the FTX native token (FTT) to surge by over 13%.

The court document provided relief to the crypto community, with many commending Ray's work to revive the exchange owning billions to its creditors. Popular blogger DegenSpartan tweeted that FTX 2.0 could be the ultimate way forward for everyone concerned.

He also mentioned that numerous lenders could sell their shares at a discounted price just to exit the asset pools, which could help the cryptocurrency exchange to become solvent again. However, not all were enthusiastic about the reboot process, as numerous objected that the foundation of the exchange was built on deceitful philosophy.

FTX Reorganization History

In an attempt to regain investor confidence, FTX announced the launch of FTX 2.0, a revamped version of the exchange with improved features and security. However, this move failed to address the underlying issues that led to the platform's downfall and investors remained skeptical of its potential for success. The FTX 2.0 launch was followed by a subpoena from Terraform, a stablecoin issuer, requesting information from FTX regarding the Terra Luna short sellers.

This legal battle further eroded trust in the exchange and raised concerns about compliance with regulatory authorities. Meanwhile, Binance CEO Changpeng Zhao revealed a $2 billion fund in the wake of the FTX meltdown, aiming to alleviate the fear of contagion spreading to other companies.

However, these efforts have yet to address concerns about the future of the FTX and its impact on the broader cryptocurrency market. The FTX catastrophe has been linked to the collapse of Terra Luna, with reports of loans using customer funds from the exchange to the trading desk.

This reveals a deep flaw in the relationship between Alameda and FTX, leading to significant FTT outflows from Alameda to FTX during the Terra Luna/3AC situation.

As the dust settles on these failed attempts to restart FTX, the cryptocurrency industry is left to grapple with the implications of these events. The future of the exchange remains uncertain, and investors are advised to proceed with caution in their dealings with the FTX and its associated assets.

In January, John Ray, the present FTX CEO, announced a specialized task force to investigate the potential of relaunching the platform.

Consequently, the proposed timeline indicates that the third quarter will submit a detailed plan. Additionally, the former institutional sales head, Zane Tackett, suggested resurrecting the FTX with all pre-collapse products and incorporating a market for tokenized claims.

In March, officials from the exchange estimated a shortfall of $8.7 billion to cover customer and creditor claims, with $1.6 billion in Bitcoin.

In April, the exchange was reorganized with the resumption of work instead of liquidation or sale at a court hearing, which allowed lawyers from Sullivan and Cromwell to intervene. The timeline suggested that a detailed plan would be filed in Q3.

On July 31st, the FTX revealed a plan to reestablish offshore exchanges for non-US users.

However, the company's creditors committee rebuked the management's proposal, citing a lack of formal discussion.

They stressed that any concrete plan must relinquish control of FTX to "qualified parties" designated by their representatives. To comply with the regulations, lawyers determined that a recovery token aligned with the standards needed to be constructed as part of the platform's launch. If their demands are not met, they threaten legal action.

What Was the Impact of the Terra Luna Collapse on FTX

The collapse of Terra Luna had a significant impact on the FTX, contributing to its eventual downfall. Some of the ways the Terra Luna collapse affected FTX are as follows:

The collapse of Terra Luna caused a domino effect that wiped out over $400 billion in value in the crypto ecosystem, with over $450 billion disappearing from the crypto market after Terra's collapse in May 20222.

The Nansen team hypothesized that Alameda Research suffered a huge loss when Terra collapsed in the spring, and to cover up the loss, client funds were moved from the FTX to Alameda. According to allegations by the Commodity Futures Trading Commission, current theory states that a fake client account was created to hide Alameda's liabilities.

On-chain data show significant FTT outflows from Alameda to FTX around the time of the Terra Luna/3AC situation, and questions about how much money was flowing between the two companies ultimately led to their downfall.

The collapse of Terra Luna revealed a deep flaw in the tangled relationship between Alameda and FTX, exposing a significant FTT outflow from Alameda to FTX during the Terra Luna/3AC situation.

The FTX disaster was linked to the collapse of Terra Luna, with reports of loans of customer funds from the exchange to the trading desk. This reveals a deep flaw in the relationship between Alameda and FTX, resulting in significant FTT outflows from Alameda to FTX during the Terra Luna/3AC situation.

The collapse of Terra Luna had a significant impact on the FTX and contributed to its eventual demise. The situation exposed flaws in the relationship between Alameda and the FTX and raised concerns about the exchange's compliance with regulatory requirements.

Other Notable Relaunches

Speaking of Terra (LUNA), we’ve actually seen quite a few crypto projects that were given second chances, including Terra itself.

LUNC vs LUNA

Just weeks after the collapse, Terra was relaunched under the name of Terra 2.0. The old Terra coin is still in circulation to this day under the name Terra Classic, or LUNC (however little worth it has now), while the ticker LUNA refers to the coin on the Terra 2.0 blockchain.

Understandably, not everyone was thrilled by this news, as the way the Terra collapse unfolded really undermined the public trust in the project. The relaunch was spearheaded by Do Kwon, the head of Terraform Labs and the person considered by many (including criminal justice systems of more than one country) as the person to blame for the original Terra’s shortcomings.

Shibarium Relaunch

On the other hand, there are projects that have arguably gotten better on the second try. One of them is Shiba Inu’s L2 solution Shibarium, which on initial launch has accumulated a lot of technical problems, leading to blockchain congestion and tokens getting stuck on the chain.

The developers took some time to work out the issues, relaunching the project with much better success at the end of August 2023. This success can be tied to the fact that the project’s team has admitted the mistakes publicly, earning the community’s trust and confidence in their ability to fix the errors and get better.

Some Well-Known Hard Forks

It can be said that many notable hard forks are essentially project relaunches, such as Bitcoin Satoshi’s Vision (BSV) which is allegedly set up the way that Bitcoin was supposed to work. There are other projects like Rethereum whose team is also saying that it’s a revival of original principles of the Ethereum blockchain.

The success of these projects can be limited, as they aren’t usually relaunched by the same team as the originals. A project’s leadership can take the stance that the relaunch is better than the original, but it’s often not immediately clear how (and why should the users change their preferences and make the jump).

Back to FTX: What's The Prognosis?

So, can FTX return to the market after its collapse, which was one of the most widely publicized scandals in recent memory?

At one point, the crypto empire's value reached US $ 32 billion. According to a recent report by FTX Trading and its related debtors, there were issues related to risk management, record keeping, and cybersecurity, with Sam Bankman Fried's prominent position in every decision contributing to the loss of control. According to the report, accounting errors, threats against whistleblowers, and other issues contribute to the company's losses.

The FTX's attorney, Andy Dietderich, informed a Delaware court that the firm was creating a plan for the future after obtaining resources and investigating the situation under the former founder, Sam Bankman-Fried. "The situation has been rectified, the dumpster fire has been extinguished," stated Dietderich.

The founder of Skybridge Capital, which suffered significant losses following the fall of the FTX, is not optimistic about the FTX's potential launch. "I don't see how

FTX can be resurrected. Currently, centralized cryptocurrency exchanges generate insufficient revenue. Many are operating at a loss, using up capital raised through ICOs, and waiting for the bull market to return and trading volumes to rise.

However, despite his experience, the Skybridge Capital founder emphasizes that the cryptocurrency industry is unpredictable. Reviving FTX comes with the high cost of reimbursing affected investors, which is expected to be billions of dollars.

Anthony Scaramucci comments, "Reviving FTX would bring a net gain to Skybridge.

Negotiating a payout would then be possible." He believes that the most viable resolution is to sell the site's licenses and software to settle debts. In the future, the software may be released under a new brand name free from any obligations of the previous site.

Summary

The FTX, a bankrupt cryptocurrency exchange, may be revitalized by the new CEO John Ray Third, who is developing a reboot plan in response to recent lawsuits. The plan to launch a revamped version of the defunct FTX Group exchange could materialize as early as the next year, potentially reinvigorating a market that has been stagnant since the platform's demise.

According to a Delaware court filing presentation, FTX has reached over 75 trading members since May to assess their interest in supporting the exchange. Numerous parties have submitted bids currently undergoing due diligence and information sharing. The deadline of September 24 was set for the new bids.

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