According to Bloomberg a report, lawyers for bankrupt cryptocurrency exchange FTX, are exploring the possibility of restarting the company. The exchange’s legal team studied tax issues, cybersecurity implications, and user experience testing.
According to the report, in February alone, they were billed a total of $13.5 million, reflecting a massive effort on the part of attorneys from Sullivan and Cromwell in recovering billions of dollars in assets and allegedly collaborating with law enforcement for the potential reboot of the collapsed cryptocurrency exchange, which was previously led by Sam Bankman Fried.
FTX’s ambitious plan to relaunch the exchange
FTX’s newly appointed CEO, John J. Ray III, has expressed interest in restarting the company’s international exchange, FTX.com, in order to “recover value for its creditors and customers.” However, the bankruptcy of the cryptocurrency exchange could complicate this effort.
The collapse of FTX left creditors with at least $11.6 billion in claims and destabilized the entire cryptocurrency market with continuing repercussions. Thus, 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 trust with its clients and the broader cryptocurrency community. This will require a concerted effort to address the issues that brought the company down, including better risk management and greater transparency about its operations.
For many, this was the starting point of the US Securities and Exchange Commission (SEC) crypto campaign against the industry. According to the report, it is not clear whether the new company management will restart the exchange.
However, there are two possibilities for the newly recruited team for the future of the Fallen Exchange. FFirst, the restart may be a limited effort to process withdrawals for customers who were unable to access their funds due to the stock market crash. The second possibility is that the restart could be a broader effort to relaunch the entire business.
Abnormal administration has been reported by the FTX team
First timer a report John Ray III of the Independent Directors on the FTX Exchange Control Failures notes that they have discovered a “significant lack of records and evidence regarding the location and access to both fiat currencies and digital assets.” It was not clear where these assets were kept or how they could be accessed.
In addition, the report notes widespread “mixing of assets,” meaning that it was difficult to determine which assets belonged to which clients. Which could have led to major legal and financial challenges for the company and its clients.
Moreover, the report states that the FTX Group has significant deficiencies in its organizational structure and management practices. Specifically, the company needed employees who were more independent and had experience or leadership in multiple core areas, including finance, accounting, human resources, information security, and cybersecurity. The company must be better equipped to manage its operations and protect clients’ assets.
Furthermore, the report highlights a lack of board oversight, which indicates that the company’s leadership and decision-making processes were not subject to sufficient scrutiny or accountability. In general, these are important topics that the newly appointed management group will have to overcome in the event of a possible reboot of the exchange’s operations.
Featured image from Unsplash, chart from TradingView.com