FTX Reboot Could Falter Due to Long-Broken user Trust, Say Observers

Customers and investors may never want to “get close” to FTX again, according to cryptocurrency industry observers.

FTX CEO John Ray’s idea to potentially restart the crypto exchange has been met with scepticism by several crypto industry pundits, who cite trust difficulties and “second-class” treatment of consumers as reasons why users may not “feel safe to go back.”

Former FTX CEO Sam Bankman-Fried praised John Ray on Jan. 20 for considering a relaunch of FTX, claiming it is the greatest option for its customers.

This happened after John Ray informed the Wall Street Journal on January 19 that he was thinking about restarting the crypto exchange as part of his attempts to compensate users.

Despite key executives being accused of criminal misbehaviour, Ray said that stakeholders are interested in the possibility of the platform returning, seeing the exchange as a “viable business.”

Binance Australia CEO Leigh Travers told Cointelegraph that obtaining a licence will be tough for FTX, especially as the market enters a new year with increasing regulation and monitoring from regulators.

Travers further stated that FTX customers have relocated “to other platforms, like as Binance” since the collapse. He questioned whether such users would “feel safe returning.”

He addressed the fact that FTX governance and controls were questioned, with administrators sharing information about some clients receiving “preferential treatment,” including “back door switches.” Travers observed:

“How will users feel comfortable going back to a platform that treated some clients as second-class?”

Given the reputational harm and lack of confidence, digital assets lawyer Liam Hennessy, partner at Australian law firm Gadens, believes it would be “extremely difficult” for FTX to “get near them again.”

Hennessy is also sceptical that FTX will ever be granted another licence, calling it “one giant question mark” that is entirely dependent on jurisdictions.

The lawyer argues that while it may be easier for the exchange to obtain licencing clearance in some offshore countries, it will be futile if its consumers do not want to return.

“To jump through the hoops the major jurisdictions will set such as the US, UK and Australia will be a serious challenge.”

Meanwhile, RMIT University Blockchain Innovation Hub senior law lecturer Aaron Lane told Cointelegraph that it is “not surprising” that FTX would consider reviving the exchange business, citing the Chapter 11 process, which allows the company to propose a plan to run the business and pay the creditors back “over time with the court’s approval.”

He believes that the “onus will be on FTX,” or a creditor who files a competing plan, to demonstrate that creditors will achieve a “better return” under the revival plan than if FTX’s assets were liquidated.

Lane, on the other hand, questioned if users would ever trust FTX again, claiming that another company intending to create a new exchange “purposes those assets” rather than designing its own interface from scratch.