FTX Creditor Reveals How Law Firm Blocked the Bankrupt Exchange Restart

Arush, a former member of the FTX Unsecured Creditors Committee (UCC), accused the defunct exchange’s bankruptcy managers, alongside its law firm Sullivan and Cromwell (S&C), of blocking the exchange’s relaunch.

Arush alleged that there were at least three funded finalists that showed interest in the launch of FTX 2.0. He noted that these included a Tribe Capital-led consortium involving Kraken Co-CEO Arjun Sethi, alongside deals from Bullish and Figure.

This reportedly contradicts claims from S&C lawyers, including Attorney Andrew Dietderich, that nobody wanted to buy FTX 2.0.

Blocked Deals Could Have Made FTX Creditors Whole

According to Arush, each of the deals offered equity structures that would have added tens of billions to creditors’ repayments. Following these offers, each of the companies has gone public, with their valuations reaching billions of dollars.

He said:

“Each of these offers had significant equity components on the table that would have added tens of billions in value to all FTX creditors’ holdings, but the lawyers killed the deal. This was as much of a surprise to us as the general public and creditors, given the value left on the table.”

Instead, the deals were killed by S&C to force a liquidation and secure higher fees for itself, Arush added.

He further stated that the FTX 2.0 bidders promised to tokenize claims and manage the multi-billion-dollar venture and crypto portfolio. He stressed that this would benefit creditors as investments in companies like Anthropic would have been held.

Notably, FTX began repaying creditors earlier this year after more than two years of bankruptcy proceedings. The payment, which exceeded 100% of their asset value, was based on the 2022 pre-bankruptcy valuation. This allowed investors to lose potential value increments that would’ve accrued during the bankruptcy process.

While some creditors have received payments, the fate of others in certain countries, including China, Russia, and Nigeria, remains uncertain. The exchange recently withdrew its motion, which had described these countries as restricted jurisdictions, but it has yet to issue repayment guidelines.

SBF Alleges Bankruptcy Managers of Mishandling FTX Assets

The latest allegations follow a similar concern recently raised by Sam Bankman-Fried, the founder of the defunct FTX cryptocurrency exchange.

SBF revealed in September that the exchange was never insolvent, but only experienced a liquidity crisis in 2022. He stated that FTX would have fully repaid customers’ funds by the end of November if lawyers hadn’t intervened.

SBF claimed that FTX entered the crisis with $25 billion worth of assets and $16 billion in equity value. This was more than enough to cover the $8 billion worth of assets the customers wanted to withdraw.

He emphasized that the lawyers alongside new CEO John Ray seized the company and pushed it into bankruptcy proceedings. He added that filing for bankruptcy allowed them to pay themselves at their discretion once FTX became a debtor’s estate. This included payments of nearly $1 billion in fees to consultants, which also comprised S&C lawyers, SBF added.

SBF further stated that FTX’s assets would have been worth $130 billion as of September 30, 2025, without the lawyers’ intervention.