FTX token jumps after CEO says ‘dynamic business’ may emerge from bankruptcy

FTX CEO John Jay Ray III said Thursday that he is open to reviving the bankrupt exchange if the move provides a way to return money to customers and other creditors of the crypto trading space.

“Everything is on the table,” Ray told The Wall Street Journal in an interview published Thursday. “There are stakeholders who are identifying what they see as viable businesses.”

After this interview, the crypto exchange token, FTT (FTT-USD) gained up to 35 percent. FTT has lost 90% of its value since the end of October 2022. At its peak in September 2021, FTT traded north of $70 per token.

The collapsed crypto exchange said on Tuesday that it had set aside $5.5 billion in liquid assets, but based on current estimates, both the company’s global and US exchanges still face a “significant shortfall” from what its trading venues owe to customers.

A court document containing the restructuring team’s latest findings shows that this $5.5 billion includes $1.7 billion in cash, $3.5 billion in crypto assets and $0.3 billion in securities. Specifically, $529 million of the company’s crypto assets are held in FTT tokens.

Last Wednesday, an attorney from the white-shoe law firm Sullivan & Cromwell representing FTX told a federal bankruptcy court that the restructuring team is working to sell $4.6 billion of non-strategic, illiquid investments.

While the exact shortfall between FTX’s assets and liabilities to creditors has not yet been disclosed in the bankruptcy proceedings, the exchange’s founder and former CEO Sam Bankman-Fried spoke of FTX US’s “liquidity and dissolution” in two Substack posts.

Bankman-Fried, who is on bail at his parents’ home in Palo Alto, also accused Sullivan and Cromwell of being “extremely delusional.”

Before FTX filed for bankruptcy, the company paid Sullivan & Cromwell $20.5 million to serve as legal counsel for various business transactions. “When I visited NYC, I sometimes worked out of the S&C office,” Banman-Fried said last week.

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The case’s American trustee has previously expressed concern about a potential conflict of interest in his argument with the judge to appoint an independent investigator.

According to court filings, several U.S. senators raised concerns that the law firm was not qualified to represent FTX in bankruptcy. One FTX lender agreed to the conflict, likening the situation to “a fox trying to protect a chicken”.

Ray also said that at first he was not given an indication of how FTX handled money and crypto, but he was helped by FTX co-founder Gary Wang and the former CEO of Alameda Research, Caroline Ellison.

On Dec. 21, a Justice Department complaint alleges Wang and Ellison pleaded guilty to criminal charges in connection with allowing FTX Alameda Research to siphon off billions in funds intended for clients.

“We don’t need to talk to him,” Ray said of his relationship with Bankman-Fried, which has remained at arm’s length. “He didn’t tell us anything I didn’t already know.”

Tomorrow, Friday, January 20, in federal bankruptcy court in Delaware, Ray is set to testify on the topic of retaining Sullivan & Cromwell and other partners as counsel for the debtors. Additionally, the court is set to examine whether the names of some of FTX’s creditors should remain under seal.

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