Judge Allows Bankrupt FTX to Sell Its Crypto Holdings
- The U.S. Bankruptcy Court for the District of Delaware has allowed cryptocurrency exchange FTX to sell, stake, and hedge its crypto holdings valued at over $3.4 billion.
- Judge John Dorsey approved FTX’s request, dismissing objections and supporting the plan to address outstanding debts and creditors’ claims.
- An attorney for FTX customers and another for unsecured creditors expressed eagerness to expedite the process during the court hearing.
- FTX argued that these activities would help limit potential losses before selling assets like Bitcoin and Ether, benefiting both estates and creditors.
- FTX also sought the expertise of Galaxy Digital’s Mike Novogratz as an adviser in managing its substantial crypto holdings, including $1.16 billion in Solana (SOL) and $560 million in Bitcoin (BTC).
The U.S. Bankruptcy Court for the District of Delaware has granted FTX, a cryptocurrency exchange, permission to sell, stake, and hedge its crypto holdings.
This decision has paved the way for FTX to address its outstanding debts and settle its obligations to creditors, totaling over $3.4 billion.
Let’s delve into the details of this groundbreaking development.
The Court’s Decision
Judge John Dorsey, presiding over the case, made the pivotal decision to approve FTX’s motion to sell its crypto holdings.
This ruling comes after the exchange filed a request seeking the court’s permission to engage in these activities back in August.
Despite facing objections from some parties, the judge overruled these objections and gave the green light to FTX.
During the court hearing, an attorney representing the ad hoc committee of FTX customers expressed support for the plan.
Simultaneously, a lawyer representing the unsecured creditors committee emphasized the collective desire to expedite the process, emphasizing, “The sooner we can get this process rolling, the better.”
In its filing, FTX laid out a comprehensive argument for the need to undertake these activities.
The exchange contended that hedging its crypto assets would help mitigate potential downside risk before selling assets like Bitcoin and Ether.
Additionally, FTX highlighted that staking certain digital assets could generate low-risk returns, ultimately benefiting both the estates and creditors involved in the bankruptcy proceedings.
Tracing the Assets
One of the critical questions posed during the hearing revolved around the origin of the deposited assets.
FTX officials were queried about their ability to identify the depositors of these assets.
In response, an attorney representing the exchange asserted that the digital assets being sold were assets of the debtors.
Another lawyer added that these assets were pooled and not traceable to individual customers.
An Adviser from Galaxy Digital
In a further move to navigate its bankruptcy proceedings successfully, FTX has sought to engage Mike Novogratz, the CEO of Galaxy Digital, as an adviser.
This strategic decision could provide valuable insights and expertise to assist FTX in handling its crypto holdings and meeting its obligations.
FTX’s Crypto Holdings
FTX disclosed earlier this week that it possesses significant crypto holdings.
Among these holdings, the exchange holds approximately $1.16 billion worth of Solana (SOL), accounting for roughly 16% of the token’s total supply.
Furthermore, FTX has a substantial stake in Bitcoin (BTC), with holdings totaling around $560 million.
These assets, combined with other lesser-known illiquid tokens, form the core of FTX’s crypto portfolio.
This court ruling marks a pivotal moment in the cryptocurrency space, showcasing the evolving legal landscape surrounding crypto assets and their treatment in bankruptcy proceedings.
In related news, FTX estate has been actively in talks with over 75 potential bidders since May 2023, aiming to revive the bankrupt crypto exchange, and they are accepting bid submissions until September 24th.
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