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Cryptogambling / FTX granted court approval to liquidate crypto holdings

FTX granted court approval to liquidate crypto holdings

Publish Date: 15/09/2023
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On Wednesday, defunct crypto exchange FTX received U.S. court permission to liquidate its crypto assets. The company said that this move would allow it to repay customers as well as minimize risks related to price volatility in crypto markets.

Due to mismanagement, FTX declared bankruptcy in November last year. However, under new CEO John J. Ray III, the company seeks to repay creditors and sell assets to help fill its $7 billion deficit.

“We are not in a rush, but we expect to do it based on market opportunities as the case proceeds.”

Andrew Dietderich, FTX’s attorney.

Meanwhile, former CEO and co-founder Sam Bankman-Fried is awaiting a trial scheduled for October 3. Currently in police custody, Bankman-Fried pleads not guilty to defrauding customers for his “philantrophic” investments. Other former FTX executives, however, have pleaded guilty.

Court approval

U.S. Bankruptcy Judge John Dorsey approved FTX’s application at a court hearing in Wilmington, Delaware.

According to court filings, the company still holds a total of $7 billion in assets, $3.4 billion of which is crypto. This includes $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC), $192 million in Ethereum (ETH) and $137 million in Aptos (APT). FTX has also recovered approximately $800 million in cash and public equity.

At the insolvency hearing, FTX’s request to liquidate received support from their two creditor committees. The first creditor committee represents company customers who are in bankruptcy, and the other one is an ad hoc committee representing non-U.S. customers who withheld their deposits with FTX’s international exchange.

At the hearing, FTX’s customers raised concerns that its asset sales might influence crypto prices. To solve that, the court allowed FTX to sell up to $100 million in cryptocurrency per week to minimize the price volatility.

Before that, FTX must undergo an initial sale period with a limit of $50 million of crypto per week. Only after gaining written approval from the involved parties will it be allowed to raise its weekly limit by $100 million per week. Eventually, FTX will be authorized to sell up to $200 million in crypto assets per week with a court order and approval from the two creditor committees.

Furthermore, it can enter into hedging and staking arrangements to lower exposure and make passive money on popular digital currencies such as Bitcoin ($BTC) and Ethereum ($ETH).

Both creditor committees said it was important for FTX to de-risk its token portfolio and liquidate its holdings in “a market favorable way” over an appropriate period with the help of an investment expert to maximize cash distributions to users.

This prompted FTX to consult Galaxy Digital, a crypto-focused capital market consultation company, to manage “information leakage” that might prompt short-sellings and steep drops in crypto prices.

FTX’s hopeful revival

As FTX is gearing up for a revival, the crypto exchange has been in communication with over 75 prospective buyers since May and has gotten multiple bids. The deadline for bid submission is set for September 24.

As FTX moves forward with its liquidation strategies, it plans to continue to recover funds by filing lawsuits against company insiders and those who took funds from the company before the bankruptcy in the coming months.

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