Is the FTX 2.0 Launch Coming?
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Is the FTX 2.0 Launch Coming?

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6 months ago

John Ray III, the new CEO of FTX, billed for work around several FTX 2.0 items — suggesting a possible FTX relaunch could be in the works.

Is the FTX 2.0 Launch Coming?

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It has been 7 months (only?) since FTX collapsed, but talks of relaunching the infamous centralized exchange (CEX) are already circulating. FTX 2.0 sounded like a joke ─ until it wasn’t. A restart of the failed FTX exchange could be in the making. As much has been confirmed by a document showing the new FTX CEO John Ray III billing for work around several FTX 2.0 items:
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But who exactly is in favor of an FTX 2.0 launch? Why would someone support re-launching a failed crypto exchange? And is this even a viable idea to make customers whole?

Let’s address all of those questions.

What Is FTX 2.0 and How Would It Work?

This is John Ray III, the new CEO of FTX that has been in charge of cleaning up the mess left behind by Sam Bankman-Fried:

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By the way, he led the efforts to recover creditors’ assets after Enron collapsed. Talk about experience.
He first hinted at re-opening FTX a couple of months ago. With the hole in the balance sheet having shrunk to “only” $6.8 billion, a re-launch was being explored as an alternative path to making customers whole more quickly. Since liquidation proceedings can take up to several years, leveraging whatever expertise is left to run the exchange could be an alternative.

What started as a thought experiment grew legs over the recent months. So much so that a “FTX 2.0 Coalition” formed around the plan:

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Loomdart, one of the major key opinion leaders in the crypto space, is one of the supporting forces behind the plan:

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He explained that launching FTX 2.0 would be the best way of getting (his own) money back. And it would be a way of getting back at Sam Bankman-Fried for recovering customer funds back without his involvement:

View post on Twitter

But how would FTX 2.0 work?

It turns out that nothing was wrong with FTX the exchange. In fact, it was profitable:

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The problem was FTX’s leadership and its habit to use customer money for the adjacent Alameda fund to gamble on the markets. Moreover, as the “coalition” argues, Binance’s de-facto market monopoly means another exchange could innovate and grab some of its market share. And with Bitfinex, there is a precedent of a fallen exchange having made customers whole again:

View post on Twitter

It seems there are good reasons to support the FTX 2.0 launch. But is the crypto space equally sanguine about this turn of events?

Can FTX 2.0 Really Work?

Some in the space support the idea of launching debt claims on the new FTX 2.0 exchange to let creditors sort the claims out themselves:

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However, not everyone is on the same page. Flood seems to think that a restructuring would actually return customer money faster:

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However, with possible bankruptcy proceedings taking five to ten years, such as in the Madoff case, a successful re-launch of FTX could plug the hole faster.

But would it be successful?

For one, the reputation of FTX is severely tarnished. How much a re-launch under credible management would help remains to be seen. Furthermore, spot exchange volumes have been declining over the last few months, meaning it could be significantly more difficult for the exchange to make as much money as it used to do:

View post on Twitter
Finally, the United States Government may want to get paid out first. The IRS filed a claim of $44 billion in missing tax revenue. It’s unclear how that is to be resolved.

It remains to be seen whether FTX 2.0 will really see the light. Even if it does, it may be a long road to recovery for its creditors.

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