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FTX token jumps after CEO says 'viable business' could emerge from bankruptcy

FTX's CEO, John Jay Ray III, said Thursday he's open to reviving the bankrupt exchange if the move provides a pathway to return money to the crypto trading venue's customers and other creditors.

"Everything is on the table," Ray told the Wall Street Journal in an interview published Thursday. "There are stakeholders we're working with who've identified what they see is a viable business."

Following this interview, the crypto exchange's token, FTT (FTT-USD), gained as much as 35%. 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 Tuesday it has identified $5.5 billion of liquid assets, but also stated based on current estimates both the company's international and U.S. based exchange still face a "substantial shortfall" from what the trading venues owe customers.

A court document with the restructuring team's most recent findings shows this $5.5 billion includes $1.7 billion of cash, $3.5 billion of crypto assets, and $0.3 billion of securities. Notably, $529 million of the company's crypto assets are held in its FTT token.

Last Wednesday, a lawyer with white shoe law firm, Sullivan & Cromwell, representing FTX told a federal bankruptcy court the restructuring team was also working to sell $4.6 billion in non-strategic illiquid investments.

While the exact shortfall between FTX's assets and the liabilities it owes creditors hasn't yet been disclosed in the bankruptcy proceedings, the exchange's founder and former CEO Sam Bankman-Fried has claimed in two Substack posts that FTX US "was and is solvent."

Bankman-Fried, who is stationed at his parents' home in Palo Alto on bail, has also accused Sullivan & Cromwell of being "extremely misleading."

Before FTX filed bankruptcy, the company paid Sullivan & Cromwell $20.5 million for services related to the firm serving as a legal advisor for various business transactions. "When I would visit NYC, I would sometimes work out of S&C’s office," Bankman-Fried said last week.

The case's U.S. Trustee has previously expressed concern about the issue of a potential conflict of interest in its argument to the Judge for appointing an independent examiner.

According to court records, several U.S. Senators have also raised concerns the law firm isn't fit to represent FTX in bankruptcy. One FTX creditor agreed with the conflict, likening the situation to "a flagrant attempt by a fox to guard a henhouse."

Ray also said he wasn't initially given an indication of how FTX held its cash and crypto, but was aided by FTX co-founder Gary Wang and the former CEO of its affiliated trading firm Alameda Research, Caroline Ellison.

A complaint from the Justice Department unsealed on December 21 showed both Wang and Ellison pleaded guilty to criminal charges related to how FTX allowed Alameda Research to spend billions in funds belonging to customers.

"We don’t need to be dialoguing with him," Ray also said of his communication with Bankman-Fried, which he has kept at arm's length. "He hasn't told us anything that I don't already know."

Tomorrow, Friday, Jan. 20 in a Federal bankruptcy court in Delaware, Ray is set to testify on the topics of retaining Sullivan & Cromwell and other partners as counsel to the debtors. Additionally, the court is set to mull whether the names of some FTX creditors should remain under seal.

FTX Group CEO John J. Ray III attends a U.S. House Financial Services Committee hearing investigating the collapse of the now-bankrupt crypto exchange FTX after the arrest of FTX founder Sam Bankman-Fried, on Capitol Hill in Washington, U.S. December 13, 2022. REUTERS/Sarah Silbiger
FTX Group CEO John J. Ray III attends a U.S. House Financial Services Committee hearing investigating the collapse of the now-bankrupt crypto exchange FTX after the arrest of FTX founder Sam Bankman-Fried, on Capitol Hill in Washington, U.S. December 13, 2022. REUTERS/Sarah Silbiger

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