April 12 (Reuters) – The bankrupt cryptocurrency exchange has recovered more than $7.3 billion in cash and liquid crypto assets, up more than $800 million since January, a lawyer for the company said Wednesday at a US Bankruptcy Court hearing in Delaware.
FTX attorney Andy Dittderich said the company has begun to contemplate its future after months of dedicated efforts to gather resources and discover what went wrong under the leadership of accused former founder Sam Bankman-Fred. Bankman-Fried pleaded not guilty.
“The situation has stabilized and the garbage fire has been extinguished,” Dietderich said.
Dietrich said FTX has benefited from the recent surge in cryptocurrency prices. The total recovery would be worth $6.2 billion based on cryptocurrency prices as of November 2022, when it filed for bankruptcy after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a bailout deal.
FTX’s new CEO, John Ray, detailed improper fund transfers and poor accounting at the crashing cryptocurrency exchange, calling it a “complete failure” of controls.
Dittderich said that while looking ahead, FTX is negotiating with stakeholders about options for restarting its cryptocurrency exchange, and may decide on that in the current quarter.
He provided a few details on what the restart might mean for FTX customers whose crypto deposits were locked out during the bankruptcy case.
Until now, only FTX customers in Japan have been able to withdraw any funds so far, Dieterich said, due to that country’s relatively strong cryptocurrency regulations.
The lawyer said that FTX would need significant capital to restart its cryptocurrency exchange, as the current client interface has little connection to the behind-the-scenes movement of funds.
“The app worked beautifully, but it was really just an interface,” Dietrich said.
Dietderich said it is not clear whether FTX should use its own funds to restart the exchange, rather than using the funds to pay off customers. Restarting the exchange may require outside financing or the sale of the exchange’s assets.
Dietrich said FTX is also working on a preliminary Chapter 11 plan that would offer the company a path out of bankruptcy.
FTX intends to file that plan by July, but has acknowledged that many details must be worked out as creditors compete for their share of the company’s assets. FTX does not expect to approve any Chapter 11 plan before the second quarter of 2024.
Bankman-Fried and several company insiders have been indicted on fraud charges for their role in the company’s collapse. In contrast to Bankman Fried’s innocence, former members of his inner circle pleaded guilty and agreed to cooperate with prosecutors.
(Reporting on Dietrich Knuth) Editing by Chris Riess, Alexia Garamfalfi, and Anna Driver
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