FTX 2.0, get your tickets now!
“To have a comeback, you have to have a setback.”
— Mr. T
👋 Friends, Rallie here. The newsletter coming back to you from the long weekend with a healthy dose of crypto, tech, and finance news.
On the menu:
- 🤝 FTX 2.0, get your tickets now!
- 🗞️ Headlines that hit
- 📈 Refresh: Corporate bankruptcy
- 💯 Top tweets
The Rallie Recap
🤔 FTX is making headlines again by announcing FTX 2.0 in recent legal documents. Can the failed exchange make a comeback!?
- Futures Exchange (FTX) was the third-largest centralized cryptocurrency exchange, before losing billions last year and falling below its $1 trillion valuation.
- Within ten days, it collapsed, with a liquidity crisis, improper risk management, a cancelled bail out by Binance, frozen assets, insufficient funds to meet customer demand, an alleged hack and a class-action lawsuit that included celebrities such as Shaquille O’Neal and Larry David. 🫡
- So, why are we talking about the revival plans of FTX? With a new CEO on deck collaborating with its creditors, reports of a range between $5.5 to $7.3 billion in assets have been allegedly recovered in April. The CEO, John Ray III confirms the organization’s plans to restart the exchange by the second quarter of 2024 (using the above funding).
- For some creditors, this is how they get some money back. A community of FTX users, now creditors, have created an account called the FTX 2.0 Coalition in support of the reboot.
- However, with the ongoing legal battles associated with FTX’s name and recouping funds from other companies such as the fight for $3.9 billion from Genesis, can it come back to its former glory?
- John Ray III, its new chief executive that specializes in corporate restructuring claims that the inexperience, untrustworthiness and lack of independent governance by FTX’s former leaders were the causes of its failure. Continuing his stance with an optimistic outlook for the future of the company and its creditors.
- With the clear distance established by the past and present leadership, a new wave of what FTX means to cryptocurrency and other digital assets may come soon.
Headlines That Hit
- 🧐 Suspicious management. Binance in trouble for allegedly blending customer funds with company revenue.
- 💸 EU’s controversial ruling. An $1.3 billion fine was slapped onto Meta over its data transfers from EU to US.
- 🥱 Dismissed. Proposed class-action lawsuit against Elon Musk’s Twitter acquisition tossed out by judge.
- 🤖 Generative AI race. $450 million raised for Google-backed AI venture, Anthropic.
- ⛏ Mining for progress. Only 12.1% of highest-ranking executive positions are filled by women in mining firms compared to 42.7% of female representation in senior and global leadership roles across sectors.
Rallie Refresh: Corporate bankruptcy
So, when a bankrupt company or cryptocurrency exchange owes you money, what do you do? Today, we break down the types of company bankruptcy, creditor preference and crypto exchange failures.
🤑 What are the types of company bankruptcy?
- The type of bankruptcy filed, Chapter 7 or 11, will affect how creditors get paid, so the amount of repayment can wildly range.
- For a Chapter 7 bankruptcy, a company liquidates its assets to pay off creditors after it declares that it cannot meet its debt obligations. As a result, it goes out of business and discharges majority of its employees but the workforce has a relatively high priority for repayment.
- For a Chapter 11 bankruptcy, a company decides to reorganize itself and stay in business. Creditors also get to vote on the company’s plan, including repayment strategies for outstanding debts but the bankruptcy court must also approve of it.
🤨 So who gets paid first?
- Creditors are listed according to priority and type of debt. Preferred creditors are paid first which include company employees and government authorities on different regional levels.
- The second one on the list are secured debts, so the creditor has a right to keep possession of a property owned by another person until a debt has been paid off. Think of the lenders that require collateral before giving any sort of loan(s).
- Unsecured debts are at the bottom of the list but have various standings, creditors assume a higher level of risk when providing products or services to a business. They often receive little of what they are owed.
- Remember to file a proof of claim and you are listed in the filing of bankruptcy.
🤧 What about cryptocurrency?
- Unlike banks, insurance for cryptocurrency holdings are limited. For example, the FDIC does not insure investors when exchanges go out of business. Stablecoins, seen as a national, government-backed flat currency, included.
- Most companies have their own process to distribute funds back to customers; however, there is a risk you get no assets back after bankruptcy. But do not pass up on the chance of getting even a little portion of your original investment back when you can.
- Some cryptocurrencies have assets backing them while others do not. So, DYOR about what you are investing in.
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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.