As Sam Bankman-Fried, the founder of what was once the world's largest cryptocurrency exchange, FTX, was convicted last week, the process of cleaning up the entire collapse is now entering its final stages. During last month's court proceedings, bankers advising on the FTX bankruptcy case testified that there were initially more than 70 parties interested in acquiring the remains of the exchange. That list has now been narrowed down to just three final contenders, with the winner expected to be announced by December of this year.
The victorious bidder will be tasked with restarting the exchange once FTX exits bankruptcy proceedings, as planned, next year. It is worth noting that the luxury properties and other assets owned by FTX in the Bahamas are not part of this particular bidding process.
This past Wednesday, the identities of all three final-round bidders were revealed: the cryptocurrency venture capital firm Proof Group, the blockchain finance company Figure Technologies, and the cryptocurrency exchange Bullish, which is run by Tom Farley, the former President of the NYSE Group.
Proof Group was previously part of the Fahrenheit consortium, which was the successful bidder in the auction for another failed crypto platform, Celsius, a competition in which Figure was also an unsuccessful participant. The involvement of Bullish, led by a prominent traditional finance executive, adds a significant new dynamic to this contest.
The Final Contenders for FTX's Future
The three entities now vying for the opportunity to reboot the FTX exchange each bring a distinct set of experiences and resources to the table.
Proof Group is an established venture capital firm with a focus on digital asset and blockchain investments. Its recent experience as part of the winning bid for Celsius's assets provides valuable insight into the complex process of acquiring and restructuring a bankrupt crypto business.
Figure Technologies specializes in leveraging blockchain technology for financial services, including lending and payments. Although it was not successful in the Celsius auction, its continued interest in acquiring a major exchange indicates a strategic ambition to expand its footprint in the crypto ecosystem.
Bullish, perhaps the most intriguing bidder, is a cryptocurrency exchange founded in 2021. It operates as an independent subsidiary of Block.one, a major open-source blockchain software development company. Bullish boasts a roster of high-profile investors, including Thiel Capital (Peter Thiel), Alan Howard, Richard Li, and Nomura Bank.
The Bullish Factor and Tom Farley's Role
The participation of Bullish, under the leadership of Tom Farley, introduces a notable link between the traditional financial world and the crypto industry's efforts to move past a major scandal.
Farley assumed the role of CEO at Bullish in May 2023, but his history with the company dates back to 2021. After stepping down as President of the NYSE in 2018, Farley moved into the Special Purpose Acquisition Company (SPAC) sector. In July 2021, Far Peak Acquisition Corporation, a SPAC he founded, announced a definitive agreement for a reverse merger with Bullish, valuing the nascent exchange at approximately $9 billion.
However, as financial markets cooled significantly throughout 2022, this high-profile deal was ultimately called off by the end of the year. Farley's subsequent appointment as CEO positions him to potentially acquire and revitalize a far larger, albeit tarnished, platform in FTX. His extensive background in leading one of the world's premier traditional stock exchanges could be seen as a valuable asset for restoring trust and operational integrity to a failed crypto enterprise.
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The Challenge of a Tarnished Brand
A central question looming over the entire bidding process is the future of the FTX brand itself. Last week's trial concluded with a jury finding Sam Bankman-Fried guilty on all seven counts, including charges of fraud and conspiracy. He faces a maximum sentence of 110 years in prison for misusing customer funds to finance real estate purchases, speculative investments, and political donations.
A major unresolved issue is the whereabouts of billions of dollars in customer funds that were still unaccounted for at the time of the exchange's collapse. This history of fraud and misuse of client assets has severely damaged the FTX name.
According to industry analysts and reports from people familiar with the bidding discussions, some professional investors may be reluctant to ever trade on a platform that continues to carry the FTX moniker. It is believed that some of the bidders are already discussing the possibility of relaunching the exchange under an entirely new brand, distancing the new venture from the failures of the past.
Should a new owner take over the exchange's assets, one potential strategy for addressing customer losses could involve distributing equity or proprietary tokens in the new entity to affected users. This would provide partial compensation and potentially help bootstrap a new community around the revitalized platform.
Frequently Asked Questions
What exactly is being sold in the FTX auction?
The auction involves the core intellectual property and technological infrastructure of the former FTX exchange. This includes its customer lists, software, and branding. It does not include physical assets like the company's infamous real estate holdings in the Bahamas, which are being sold separately as part of the bankruptcy process.
Who are the main bidders for FTX's assets?
The three final bidders are Proof Group (a crypto VC firm), Figure Technologies (a blockchain finance company), and Bullish (a crypto exchange run by former NYSE President Tom Farley).
Will the revived platform still be called FTX?
It is highly possible that the winning bidder will choose to rebrand the exchange. The FTX name is heavily associated with fraud and customer losses, which could hinder efforts to attract new users and rebuild trust. Some bidders are reportedly already considering a new name.
How will FTX's former customers be compensated?
While plans are not final, a likely solution is for the new owner to issue shares in the new company or its own digital tokens to creditors and former customers. This would partially compensate them for their lost funds and potentially align their interests with the success of the new venture.
What does Tom Farley's involvement mean for the process?
Tom Farley's extensive experience leading the New York Stock Exchange brings a layer of traditional finance credibility to the Bullish bid. His involvement suggests a focus on rebuilding with an emphasis on regulatory compliance, operational transparency, and institutional trust.
When will we know who the winner is?
The winning bidder is expected to be selected and announced by December of this year. The actual relaunch of the exchange would occur after FTX officially exits bankruptcy, which is projected for sometime in 2024.