Reviving FTX: The Growing Call for FTX 2.0

The failure of the cryptocurrency platform FTX dealt a severe blow to the industry, with the bankruptcy proceedings involving the largest number of creditors ever recorded in such a case.

Although one might assume that the sector would prefer to move on from this setback swiftly, why is there now an increasing demand to revive the fraudulent exchange?

As per recent documents filed during the FTX insolvency proceedings, an unprecedented number of 1.4 million clients are owed funds in the aftermath of the firm's downfall.

The cryptocurrency sector has been deeply rattled by this setback, and its credibility has suffered a significant blow.

Nevertheless, a growing faction, mainly comprising of those 1.4 million creditors, is becoming increasingly vocal in advocating for the relaunch of the platform.

Creditors' Best Route to Recovery

After several months, most of the creditors have finally arrived at the same decision. For the majority of these FTX clients whose assets are stranded on the insolvent platform, relaunching it appears to offer the greatest possibility of full restitution.

The Chapter 11 process is primarily focused on investigating options for restructuring a firm, and companies facing such situations frequently find ways to resume operations.

Hence, there seems to be no reason why FTX cannot follow suit.

It is possible to revive the company by adopting a new corporate framework, whereby the current FTX shareholders would be replaced by the 1.4 million creditors as the new equity holders.

Some have expressed reservations about the notion of issuing equity through a token offering, citing regulatory compliance concerns, especially in the current regulatory climate.

Nevertheless, as demonstrated by the recent suggestion from crypto investment manager NovaWulf regarding the insolvency proceedings of Celsius, there is a feasible pathway towards a regulatory-compliant token offering that would grant creditors a stake in the company.

Incentives Are Powerful

Cryptocurrencies have in numerous ways represented an extensive experiment in incentive mechanisms, and this same concept can be further explored in the context of FTX 2.0.

In the event that the exchange is launched anew under fresh leadership, it will possess a customer and equity holder base of 1.4 million, all of whom will have their financial prospects intertwined with the triumph of that enterprise.

Any other exchange would covet such a driven and committed nucleus of users who are eager to see the business prosper and generate profits.

Furthermore, FTX boasted 9.7 million clients, many of whom favored its user experience, functionality, and features compared to other exchanges.

Nonetheless, certain sophisticated traders and market makers have censured the platform for possessing a matching engine and API with high latency.

Apparently, the exchange's programmers had designed a new API only a few weeks before its demise, and this upgrade has already been completed and is ready for deployment.

However, it remains uncertain whether this improvement would have remedied the latency issue.

Nevertheless, it is a technical problem that can be resolved and did not impede millions of users from accessing and utilizing the platform.

A Highly Profitable Business

Based on the information that has been unveiled following the collapse, it is evident that FTX was an incredibly lucrative business. It garnered revenues surpassing $1 billion and profits amounting to $300 million.

However, the company's erstwhile CEO and founder, Sam Bankman-Fried (SBF), deceitfully transferred user funds from the platform to support a sister company and unprofitable quantitative trading firm, Alameda Research.

Alameda was the force that, aided by a fraudster, caused FTX's downfall. Nonetheless, the fundamental FTX enterprise itself was robustly profitable on its own.

Industry-Wide Benefits of FTX 2.0

The support for FTX 2.0 from the wider industry, beyond the creditor group, has been lacking.

Many hold a misconception that FTX equates to fraud, despite the fact that the exchange has been taken over by new management and the fraudsters have been removed.

There are others who prefer to distance themselves from the FTX disaster and leave it in the past. However, those who believe in the legitimacy of the crypto/blockchain industry may be neglecting something important.

Walking away from 1.4 million crypto participants is irresponsible when advocating for them and supporting FTX 2.0 can benefit the entire industry.

There has been a lack of leadership on this issue, although many creditors still hold hope that crypto's "thought leaders" will step up.

Regarding the FTX Debtor, CEO John Ray III has indicated a willingness to restart the business.

Nevertheless, if the 1.4 million creditors amplify their voices and join the push for an FTX relaunch, the conversation around the matter will certainly become more concentrated.