A year after the FTX collapse, three potential buyers remain who want to resume the operation of the cryptocurrency exchange. The FTX insolvency administrators could choose one of the three contenders as a predecessor as early as December.
In November 2022, the collapse of the then second-largest cryptocurrency exchange shook the industry. What was once promoted as one of the safest crypto trading platforms turned out to be a house of cards. Even though the then ex-CEO Sam Bankman-Fried who was recently found guilty embezzled customer funds, some traders wish for a FTX restart. The exchange’s interface had been widely used and accepted by the market making it a valuable asset. With the three serious bidders, an FTX revival could soon become a reality.
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A profitable business?
As of fall last year, FTX was still among the largest cryptocurrency exchanges globally. The exchange handled billions of dollars in daily trading volume. Launched in 2019 as a pure derivatives exchange, the platform had even surpassed Coinbase in spot volumes the previous summer. FTX generated billions in annual revenue through modest trading fees. For comparison, despite the crypto wintere Coinbase generated around $3 billion in revenue in 2022. FTX, on the other hand, was valued at $32 billion.
However, in November 2022 the house of cards began to fall, starting with a bank run on the exchange. FTX’s assets were inaccessible due to investments done by the sister venture company “Alameda Research”. The huge amount of withdrawals and insufficient liquidity forced FTX to its knees, resulting in a $10 billion deep hole in the balance sheet. Over the past year, a significant portion of assets owned by the FTX construct have been sold. Further, it might be possible to secure additional billions for the former customers over the next year.
Some Traders hope for a FTX restart
Currently, two initiatives are running for a resume operations. On the one hand, the FTX insolvency administrator aims to develop a plan for the restart of the exchange by mid-December. The parties who come into consideration for acquiring FTX are the cryptocurrency exchange "Bullish," financial services provider "Figure Technologies," and investment group "Proof Group". The bidders would inherit a list of nine million former customers. The extent to which the "FTX" brand would be retained is unclear.
"We've narrowed down the interested parties from a large number to a smaller number, what we call our second round. I'm optimistic that we'll have either a plan for a reorganized exchange, a partnership agreement, or a main bidder before December 16." - Kevin Cofsky, Partner at Perella Weinberg Partners
On the other hand, a coalition of former traders has formed with the vision to revive FTX as FTX 2.0 which would be financed by issuing company shares to creditors. Thus, the coalition aims to take a different path than the insolvency administration. Members of the coalition hope that their plan will lead to a complete recovery of all customer funds instead of an immediate liquidation of the remaining assets.
