Crypto.com, along with numerous other potential suitors, was not chosen to acquire FTX Europe as the bankruptcy estate will not be selling it.
Crypto.com, along with numerous other potential suitors, was not chosen to acquire FTX Europe as the bankruptcy estate will not be selling it.
The Rise and Fall of FTX Europe: A Tale of Risk and Missteps
In a recent lawsuit, the team behind FTX Europe has alleged that the initial acquisition of the entity that became FTX Europe was a disastrous business decision, driven by personal ties to FTX founder Sam Bankman-Fried and false claims of regulatory connections. However, documents and interviews with insiders paint a different picture, revealing that FTX Europe was a thriving entity providing a core service to the European market before the collapse of its parent company, FTX.
FTX Europe, previously known as Digital Assets DA AG, was a Swiss company founded in 2020. It offered a white-labeled service for exchanges to offer tokenized stocks, which allowed users to trade shares at any hour. FTX Europe also provided perpetual futures trading and had plans to expand its offerings to Europe, a move that would have given it a significant competitive edge.
At the time of its acquisition by FTX in November 2021, DAAG was a profitable company, with an EBIT of around $7.3 million. In contrast, another acquisition by FTX, LedgerX, a U.S. futures exchange, incurred losses of $6.1 million in 2021. The healthy financials and potential for growth made FTX Europe an attractive asset, as evidenced by the interest shown by potential buyers during the bankruptcy proceedings.
Crypto.com, among others, expressed interest in acquiring FTX Europe. The company’s unique ability to offer perpetual futures contracts and its key operating license were particularly enticing. However, despite the interest, FTX, which is facing significant debts and a complex bankruptcy process, does not seem interested in selling FTX Europe. Instead, it intends to remove it from the bankruptcy proceedings, likely for liquidation.
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The decision to sue the executives of FTX Europe, alleging overpayment for the acquisition and fraudulent use of customer assets, adds another layer of complexity to the situation. While key aspects of the lawsuit may hold true, including the potential fraudulent use of customer assets, interviews and documents call into question the bankruptcy estate’s characterization of the acquisition as a disastrous business deal.
The bankruptcy estate’s decision to hold onto FTX Europe and continue operating it might be motivated by a desire to maximize financial value for creditors. It also serves to signal a new era for the embattled firm. By demonstrating that FTX Europe, despite its troubled past, can be turned around and become a valuable asset, the estate can better position itself for potential reorganization or future sales.
However, the estate’s strategy carries risks. The recent letter sent by the bankruptcy estate’s law firm to the Cypriot regulatory agency overseeing FTX Europe, stating that the estate no longer intends to provide financial support and plans to dismiss the Chapter 11 case, could lead to the liquidation of FTX Europe. In such a scenario, FTX Europe would be unable to relaunch or find a buyer for its operating license.
The complex and ever-evolving saga of FTX Europe highlights the challenges faced by a company in financial distress, as well as the opportunities for recovery and reinvention. Only time will tell if FTX Europe will find a new lease on life or become another casualty of the tumultuous world of cryptocurrency.
