FTT Surges 200%, FTX Creditors Gain $427M But Can’t Cash Out

A recent surge in the price of FTT has added $427 million to the purse of FTX and Alameda Research, although the funds are mostly illiquid.

The price of FTT has rallied over 200% in the past two days. The increase is largely connected to comments about FTX’s future by Gary Gensler, Chairman of the United States Securities and Exchange Commission (SEC).

At the DC Fintech Week, the SEC Chair revealed that FTX could restart the platform if its new owners operate it according to the law. Gensler’s assertions followed reports that three companies, including Tom Farley’s Bullish exchange, are in the running to acquire FTX with an eye on a potential restart.

The positive developments around FTX led to a substantial increase in FTT price, adding $427 million to the value held by the FTX bankruptcy estate. FTX and Alameda Research wallets hold 267 million FTT tokens (approximately $761 million at today’s prices). 

FTT trades at $2.94 at the time of writing, representing a 28% increase in the past 24 hours. The token’s price peaked at around $3 following the news and maintains a market cap of around $1 billion.  

FTT Funds Largely Illiquid

While the increase in the value of FTT catches the eye, the funds remain largely illiquid as FTX entities control a significant portion of the token’s total supply. The 267 million tokens held by the exchange represent 76% of its total circulating 328.8 million tokens.

Hence, the token’s impressive runup in the past few days has been led by whale activity and retail interest in speculating on the potential of an FTX restart. It is also noteworthy that FTX entities have not deposited any of their holdings to an exchange to sell despite the recent price surge.

Recall that FTX’s infamous collapse was tied to discoveries that it was making loans to sister entity Alameda Research while using its FTT token as a primary collateral. That development triggered a chain of events that led up to FTX’s demise, as no substantial markets exist for selling such a substantial amount of FTT tokens.

As a result, it is almost certain that FTT tokens in its current model will likely not be sold to reimburse affected customers.

Yet, a possible restructuring of the token’s mechanics by the bankruptcy estate may bring it back into the picture, a factor many speculators may be banking on by buying the token in recent days.

Meanwhile, FTX’s former CEO, Sam Bankman-Fried, has already been convicted and faces up to 115 years in prison for his role in the demise of the once multi-billion dollar-valued crypto exchange.