According to a Bloomberg report, attorneys for the bankrupt crypto exchange FTX, have been exploring the possibility of rebooting the company. The exchange’s legal team has examined tax issues, cybersecurity implications, and user experience testing.
Per the report, in February alone, their bill totaled $13.5 million, reflecting a significant effort by the attorneys from Sullivan & Cromwell in recovering billions of dollars in assets and allegedly cooperating with law enforcement for the potential restart of the fallen crypto exchange, formerly led by Sam Bankman-Fried.
FTX’s Ambitious Plan To Relaunch The Exchange
John J. Ray III, the newly appointed CEO of FTX, has expressed interest in restarting the company’s international exchange, FTX.com, to “recover value for its creditors and customers.” However, the crypto exchange’s bankruptcy may complicate this effort.
FTX’s collapse left creditors with at least $11.6 billion in claims and destabilized the entire cryptocurrency market with ongoing ramifications. Thus, any effort to restart the exchange would 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 customers and the broader cryptocurrency community. This will require a concerted effort to address the issues that led to the company’s collapse, including better risk management and greater transparency around its operations.
For many, this has been the starting point of the U.S. Securities and Exchange Commission’s (SEC) crypto crackdown against the industry. According to the report, it is not clear whether the company’s new management will restart the exchange.
However, there are two possibilities for the newly appointed team for the future of the fallen exchange. First, the restart could be a limited effort to process withdrawals for customers who could not access their funds due to the exchange’s collapse. The second possibility is that the restart could be a broader effort to relaunch the entire business.
Abnormal Management Reported By The FTX Team
The first interim report of John Ray III to the independent directors on control failures at the FTX exchange suggests that they discovered a “significant lack of records and evidence regarding the location and accessibility 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 have further led to significant legal and financial challenges for the company and its customers.
Furthermore, the report suggests that the FTX Group had significant organizational structure and management practices deficiencies. Specifically, the company needed more independent, experienced personnel or leadership in multiple essential areas, including finance, accounting, human resources, information security, and cybersecurity. The company must be better equipped to manage its operations and safeguard customer assets.
Moreover, the report highlights the lack of board oversight, which suggests that the company’s leadership and decision-making processes were not subject to adequate scrutiny or accountability. Overall, these are important subjects that the newly appointed management group must overcome in case of a potential reboot of the exchange’s operations.
Featured image from Unsplash, chart from TradingView.com
#crypto
