Bankrupt FTX Receives Approval to Liquidate Crypto Assets Worth Billions
The judge overseeing the bankruptcy proceedings of cryptocurrency exchange FTX has granted approval for the liquidation of its crypto assets, which are valued at billions of dollars. This decision will enable the exchange to repay its US customers in US Dollars and mitigate the risks associated with price volatility in the crypto markets.
FTX Can Sell Assets Worth Billions
United States Bankruptcy Judge John Dorsey has given his consent to FTX’s proposal to sell its crypto assets. The approved plan allows the exchange to sell approximately $3.4 billion worth of cryptocurrencies, including Solana, Bitcoin, Ethereum, and various others. The sale will be overseen by investment manager Galaxy Digital, led by Mike Novogratz.
Under this plan, FTX can sell up to $100 million worth of tokens per week, with the possibility of increasing this limit to $200 million for individual tokens. Additionally, the exchange is permitted to engage in hedging and staking agreements to minimize price volatility risks and generate passive income from cryptocurrencies like Bitcoin and Ethereum.
Judge Dorsey has stated that FTX can request an increase in the weekly maximum limit with written authorization from the court. However, it is important to note that sales of Bitcoin, Ethereum, stablecoins, and redemption of stablecoins will not be included in the $100 million weekly limit set by the judge. Moreover, transactions involving bridging tokens from non-native blockchains back to their native networks are also exempt from this limit.
Risk To Crypto Markets
FTX acknowledges that its token liquidation efforts could have a significant impact on crypto markets. To manage this risk of “information leakage” leading to short-selling activity and sharp price declines, the exchange has appointed Galaxy Digital. FTX also recognizes that holding its current crypto portfolio carries significant risk, potentially leaving it stuck with declining assets.
According to court filings, FTX currently holds a total of $3.4 billion worth of cryptocurrency, including Bitcoin, Ethereum, Aptos, and a substantial amount of Solana tokens. The prices are based on the valuation as of August 31st.
The FTX Collapse
In November 2022, FTX experienced a dramatic collapse that resulted in its unexpected bankruptcy, causing shockwaves throughout the crypto markets. Reports suggest that criminal mismanagement played a significant role in the collapse, with allegations of billions of dollars in customer funds being lost. FTX co-founder Sam Bankman-Fried is awaiting trial for various criminal charges, scheduled for October.
Despite the challenges, FTX has managed to recover over $7 billion in assets to repay its customers. The exchange is also pursuing additional recoveries through lawsuits against FTX insiders and other defendants.
Hot Take: FTX Receives Approval to Liquidate Crypto Assets
Bankrupt cryptocurrency exchange FTX has obtained permission from the court to sell its crypto assets valued at billions of dollars. This decision not only allows FTX to repay its US customers in US Dollars but also helps mitigate risks associated with price volatility in the crypto markets. With this approval, FTX can proceed with selling approximately $3.4 billion worth of cryptocurrencies under the supervision of Galaxy Digital. The exchange is now able to take measures such as hedging and staking agreements to minimize risk and generate passive income. However, these liquidation efforts could impact crypto markets, leading FTX to hire Galaxy Digital to manage potential risks arising from information leakage and short-selling activities.
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