Bitcoin is still hovering around $30000, and the FTX that once caused the collapse of the entire coin industry is about to restart?

Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes

Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes. net. cn) in Shanghai

After a brief surge in mid July, the price of Bitcoin has been hovering between $29000 and $30000 recently. According to CoinGecko data, as of press release, Bitcoin was trading at $29202.76, a decrease of 0.98% within 24 hours. When the entire coin circle tends to calm down, the cryptocurrency exchange FTX, which once pulled the entire coin circle down with its own efforts, may start the road to restart.

On August 1st, the official tweet from the FTX2.0 Creditor Alliance stated that FTX has submitted a preliminary restructuring plan and term sheet, which includes many key information, such as all non customer claims being classified as secondary, FTT claims with zero amount, cash repayment, and restarting offshore transactions to compensate for customer gaps.

The restructuring team believes that compared to other methods, FTX restart seems to be the best way to ensure better results for creditor repayment. It is worth noting that FTX's restructuring plan is still in its early stages, and the team will submit a revised plan and disclose a statement in the fourth quarter of 2023 based on feedback from creditors to reach a consensus and overcome bankruptcy difficulties.

After the news spread, the FTT token rose by over 17% at one point, but soon after it fell. As of press release, the latest price of FTT was $1.25, which fell 6.97% within 24 hours.

Will FTX revive?

According to the FTX restructuring documents, considering that the FTX bankruptcy case involves very large and complex debt claims, litigation grounds, and disputes, including claims against debtors and inter company claims from different debtors against other debtors, the distribution of this FTX restructuring plan aims to provide a sincere solution to the world.

According to the restructuring documents, FTX will repay through the sale of various assets of FTX, mainly consisting of three recovery pools: FTX.com customer related assets, FTXUS customer related assets, and other assets that the debtor believes are not clearly attributable to the exchange. At the same time, FTX has also classified creditors, but almost all proposed creditor categories are classified as "incomplete", which means that FTX expects creditors to not receive full compensation and will pay in US dollars in a certain proportion. However, holders of FTT (whether held on the FTX exchange or not), preferred equity and equity investors, and other related creditors cannot receive any compensation.

The restructuring documents also indicate that creditors can choose to pool their assets to create an offshore exchange, which means abandoning cash payments to purchase new exchange shares. The debtor may decide whether to have the offshore trading company repay in the form of equity securities, tokens, or other equity or invest in these stocks, tokens, or equity

FTX's current CEO, John J. RayIII, stated that the team submitted a restructuring plan early in the bankruptcy proceedings to obtain feedback from creditors. FTX hopes to collaborate with creditors to revise the plan in the third quarter of 2023 and submit a disclosure statement in the fourth quarter.

The restructuring plan also indicates that in addition to establishing an "offshore exchange company", FTX is considering establishing a new trust company called "FTXVenturesTrust". The trust will hold FTX's investments in private startups and digital tokens that FTX does not plan to sell immediately after exiting bankruptcy. FTX has not yet decided whether the trust will be owned by FTX's bankruptcy estate or traded separately after bankruptcy.

The reporter learned that as of now, blockchain technology company Figure has expressed interest in helping support the restart of FTX. In addition, venture capital firm TribeCapital recently stated that it is considering injecting new funds to restart FTX. According to FTX's consulting firm Alvarez& A list released by Marsal shows that well-known companies and institutions, including Nasdaq, RippleLabs, Galaxy Digital, BlackRock, Robinhood, and OKCoin, have all expressed interest in the restart of FTX.

It is worth noting that, benefiting from Japanese regulatory regulations such as asset segregation and fiat currency custody, as early as February this year, FTXJapan has reopened its cryptocurrency and fiat currency withdrawal services, becoming the first subsidiary to open and fully withdraw funds after FTX filed for bankruptcy proceedings. It is reported that FTXJapan's customer asset return work is currently progressing smoothly, and 80% of legal and virtual currencies such as Japanese yen have been returned to customers. If the trading system used by FTXJapan's predecessor, QUOINE Corp., runs smoothly, the Japan Financial Agency may allow FTXJapan to resume operations before the end of the year.

But the plan to restart FTX is not optimistic. Kraken co founder Jesse Powell believes that "FTX2.0 will be worse than starting from scratch. FTX2.0 has no team, no technology, no license, no bank cooperation, and the brand has been damaged. Custodians should sell domain names and trademarks to the highest bidder. Anything else is just a fee extraction attack on delusional creditors

Regarding this, independent international strategy researcher Chen Jia told reporters from China Times that as long as US regulatory agencies do not directly oppose it, the restart of the FTX is almost inevitable, as there are currently a large number of currency circle investors holding risk exposure due to the FTX thunderstorm. The key lies in whether the creditors ultimately agree to the restructuring, "Chen Jia said.

In Chen Jia's view, there are many problems with the current FTX debt restructuring plan. Whether it is establishing an offshore exchange or a debt to equity swap model, the essence is to borrow new to repay old, stay away from regulation, and even return to a decentralized approach. Many people believe that FTX is further cooperating with the investigation and undergoing compliance transformation, but in reality, it is just a desperate attempt to quench thirst.

The road to restart is fraught with difficulties

FTX used to be one of the world's largest cryptocurrency trading platforms, handling transactions worth trillions of dollars. Its bankruptcy dealt a devastating blow to the entire cryptocurrency ecosystem, causing heavy losses to many investors and institutions, and also lowering industry trust to its lowest point. Therefore, FTX's restart plan is destined to not be smooth sailing.

As bankruptcy progresses day by day, customer assets are also deteriorating, "said John Dorsey, a judge at the Delaware Bankruptcy Court in the United States." For creditors, the costs of litigation and restructuring are high, and it is not yet clear whether restarting FTX can truly improve their situation.

The restart of FTX will indeed bring some positive impacts, such as restoring the confidence of some investors, and may also help FTX recover some assets and alleviate its debt problem. This means that the recovery and reconstruction of the market to some extent reflects the resilience and potential of the crypto market. However, the restart of FTX is not an easy task, and the obstacles it faces are also very significant. This includes huge debts, legal disputes, its own reputation repair, and the restart Subsequent asset allocation, etc UWEB President and Honorary Chairman of the Hong Kong Blockchain Association, Yu Jianing, told reporters from China Times.

According to the second midterm report released by the FTX bankruptcy restructuring team in June this year, the current deficit is about $8.7 billion, and approximately $700 million in current assets have been recovered. However, there is still a long way to go from a debt of $12 billion, and the third report will be released in August. In order to recover more assets, the FTX liquidation team recently sued former executives such as founder SBF, seeking to recover the misappropriated $1 billion in funds.

It is worth noting that with the advancement of FTX's bankruptcy restructuring, the accumulated legal costs are consuming users' funds. As of the court documents released at the end of June, the liquidation expenses of FTX have exceeded $200 million so far, of which over $120 million was spent on various legal expenses from February 1 to April 30, 2023 alone. According to the provisions of the US bankruptcy law, these expenses will be superior to users' claims and payments.

Based on the above, many creditors question the lack of substantial progress in the FTX restructuring team, which not only reveals a decrease in assets compared to a few months ago, but also repeatedly repeats known content in reports, and has significant irrationality in lawyer expenses.

In response, Wu Gaobin, co initiator and executive vice president of the Web3.0 Special Committee of the Chinese People's Association, told reporters from the China Times that although FTX's restructuring plan has released some important news, it has not met the requirements of all creditors, which may lead some creditors to take legal measures and initiate class actions.

In Wu Gaobin's view, FTX, as the exchange that once triggered the collapse of the entire crypto market, faces some obstacles in restarting. Firstly, there is the debt issue. FTX's current debt scale is huge, far exceeding the assets it has recovered. This means that even if FTX restarts, it will be difficult to get rid of the problem of debt; Secondly, FTX's reputation has been severely damaged, and investors' trust in it has significantly decreased. This will pose significant challenges to the operation and development of FTX. Creditors need to carefully consider the option of debt to equity conversion in the restructuring plan and consult with professionals.