FTX Navigates Regulatory Storm as it Seeks to Reboot Cryptocurrency Exchange

In the midst of a regulatory crackdown on the cryptocurrency industry, FTX, the failed crypto company, has ambitious plans to relaunch its flagship international cryptocurrency exchange. However, with ongoing bankruptcy proceedings, the road ahead is fraught with challenges and uncertainties.

FTX’s Chief Executive, John J. Ray III, recently announced that the company has commenced the process of soliciting interested parties for the relaunch of the FTX.com exchange, according to the WSJ. Among those expressing interest in supporting the restart is blockchain technology company Figure.

FTX’s attempt to revive its operations takes place against a backdrop of increasing regulatory intervention which its own implosion helped cause. The successful retrieval of misspent customer funds is critical to FTX’s recovery, but it’s a task that poses considerable difficulties. Investigations led by Ray have uncovered details of FTX’s improper use of customer funds, including investments in various ventures. Recovering these funds has proven to be an arduous process, exacerbated by the significant decline in the value of these assets compared to their initial purchase price.

FTX has to also resolve its dispute with Bahamian liquidators, who seized a substantial number of FTT tokens (FTX’s in-house cryptocurrency) in November. Failure to reach a settlement framework is resulting in prolonged litigation over the rightful ownership of these assets, further complicating FTX’s path to recovery.

It’s seems likely that FTX will attempt a rebrand, especially if its founder is convicted of financial crimes. However, why people would choose to use their rebranded crypto exchange over competitors at this point seems to be a mystery. New competitors such as EDX—a centralized crypto exchange powered by Wall Street—will likely be seen as a more secure way to trade crypto, especially because it’s located in the U.S. Regardless, the crypto trading market is significantly more competitive now than when FTX started, and regaining market share will be a challenge.

“At this point, those in charge of FTX have little to lose in attempting to revive the company and salvage what value they can,” said James Wester, Co-Head of Cryptocurrency at Javelin Strategy & Research. “I’m certain there are plenty of people within crypto who would prefer FTX to disappear forever, especially in the current regulatory climate, but there is a potential benefit to this effort if it helps the company recover funds that can go towards making investors and customers whole.”