FTX considers restarting crypto exchange, lawyers bill millions

According to a Bloomberg report, lawyers for the bankrupt crypto exchange FTX, have explored the possibility of restarting the company. The exchange’s legal team has investigated tax issues, cyber security implications and user experience testing.

According to the report, in February alone, their bill totaled $13.5 million, reflecting a significant effort by Sullivan & Cromwell attorneys to recover billions of dollars in assets and allegedly cooperate with law enforcement for the potential reboot of the fallen crypto exchange , formerly led by Sam Bankman-Fried.

FTX’s ambitious plan to relaunch the stock exchange

John J. Ray III, the newly appointed CEO of FTX, has expressed interest in relaunching the company’s international exchange, FTX.com, to “recover value for its creditors and customers.” However, the crypto exchange’s bankruptcy could complicate these efforts.

FTX’s collapse left creditors with at least $11.6 billion in claims and destabilized the entire cryptocurrency market with ongoing consequences. Therefore, any effort to restart the exchange will be complex, requiring significant legal and regulatory expertise to navigate the various challenges and risks.

One of the critical challenges facing FTX is rebuilding the trust of its customers and the wider cryptocurrency community. This will require a concerted effort to resolve the problems that led to the company’s collapse, including better risk management and greater transparency around operations.

For many, this has been the starting point for the US Securities and Exchange Commission’s (SEC) crypto crackdown on the industry. According to the report, it is not clear whether the company’s new management will restart the stock exchange.

However, there are two possibilities for the newly appointed team for the future of the fallen stock exchange. FFirst, the reboot may be a limited effort to process withdrawals for customers who were unable to access their funds due to the stock market’s collapse. The other possibility is that the reboot could be a broader effort to relaunch the entire business.

Abnormal management reported by the FTX team

The first interim period report by John Ray III to the independent directors about control failures at the FTX exchange suggests they discovered a “significant lack of documents and evidence regarding the location and availability of both fiat currency and digital assets.” It was unclear where these assets were held or how they could be accessed.

Additionally, the report notes extensive “commingling of assets,” meaning it was difficult to determine which assets belonged to which customers. Which could further lead to significant legal and financial challenges for the company and its customers.

Furthermore, the report suggests that FTX Group had significant deficiencies in its organizational structure and management practices. Specifically, the company needed more independent, experienced personnel or leadership in several key areas, including finance, accounting, human resources, information security and cyber security. The company must be better equipped to manage operations and safeguard the customers’ values.

Furthermore, the report highlights the lack of board supervision, which suggests that the company’s management and decision-making processes were not subject to sufficient scrutiny or accountability. Overall, these are important topics that the newly appointed management team must overcome in the event of a possible restart of the stock exchange’s operations.

Featured image from Unsplash, chart from TradingView.com