FTX officially announces no relaunch, FTT reborn as a meme
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FTX officially announces no relaunch, FTT reborn as a meme
Good news: full compensation. Bad news: calculated based on prices from November 2022.
Navigating Web3 tides with focused insightsOriginal | Odaily Planet Daily
Author | jk
On Wednesday, January 31, local time in the United States, bankrupt cryptocurrency exchange FTX informed the court it expects to fully repay its customers. This statement was announced during a court hearing, and U.S. Bankruptcy Judge John Dorsey has preliminarily approved this timeline, although a significant portion of creditors expressed disagreement.
Under court procedures, FTX has abandoned plans to restart its platform and instead focused on fully repaying former customers. Due to lack of buyers, FTX dropped its plan to relaunch. Advisors conducted an extensive market search for investors willing to revive FTX, but no one offered the necessary capital to restart the exchange.
FTX attorney Andrew Dietderich said the repayment process will require claimants to submit proof verifying they held and lost assets on FTX. This verification process will be reviewed by restructuring advisors.
Is the platform token FTT still useful?
FTX's native token FTT briefly rose after the company’s announcement but then sharply declined. A few days ago, FTT fluctuated around $2.65, but has now dropped to approximately $1.91, hitting a low of $1.65, with a 7-day decline of 27.04%.
FTT price movement, source: Coinmarketcap
This market reaction was actually expected. Under previous expectations of a relaunch, FTT’s appreciation relied on the possibility that FTX would reactivate FTT as its native token or use it partially to issue a new native token. However, those hopes have vanished with FTX’s announcement that it will not restart. With no prospect of relaunch, FTT effectively loses any new utility, and as FTX continues liquidating assets to compensate customers, the value of FTT is bound to fall further due to selling pressure.
In the worst-case scenario, FTT may eventually become like Terra’s post-collapse Luna Classic—an effective memecoin whose price fluctuates with news cycles, but which has almost no chance of returning to its former highs.
Full repayment: good news, but at what asset valuation date?
Previously, FTX reported over 36,000 claims totaling about $16 billion. Last year, it indicated it could only repay roughly 90% of customers. Now, aiming to fully repay customers is certainly better news—but raises an immediate question: FTX likely won’t be able to return the exact same types of tokens, so if compensation is made in dollar value, which date’s prices will be used?
Before FTX collapsed, Bitcoin was worth around $20,000. At the time FTX filed for bankruptcy, Bitcoin had fallen to about $16,000, while today it trades around $43,000—a massive difference. "Many of these claims are based on periods when cryptocurrency values were significantly depressed," Kris Hansen, attorney for the FTX creditors committee, said during Wednesday’s hearing.
According to Bloomberg, U.S. Bankruptcy Judge John Dorsey ruled that each claim’s size will be determined by the amount owed to customers or creditors on the day FTX filed for bankruptcy. Dorsey also approved rules for calculating the amounts owed to each creditor and customer. Some customers complained that fixing their claims at late-2022 prices would cause them to miss out on gains from rising digital asset prices. Dorsey ruled that bankruptcy rules require debts to be valued as of the date the company sought court protection. Thus, this aligns with Odaily’s earlier reporting that FTX proposed valuing claims based on Bitcoin at around $16,000—meaning creditors will face substantial losses.
On the positive side, without the ongoing crypto bull run since 2023, the remaining cryptocurrency assets left after FTX’s collapse might not have been sufficient to repay all investors. In other words, compensating based on current market prices would have been nearly impossible; rather, this recent rally has made it feasible for FTX to offer repayments based on 2022 November prices.
"I want the court and stakeholders to understand this is not a guarantee, but a goal," Dietderich said. "There is still substantial work and risk between us and achieving this outcome. But we believe this goal is attainable, and we have a strategy to reach it."
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