In a pivotal decision, a Delaware district judge has granted approval for the bankrupt cryptocurrency exchange FTX to commence the sale of billions of dollars’ worth of digital assets. The proceeds from these sales will be allocated to the exchange’s creditors, marking a significant step in the complex bankruptcy proceedings.
The approval came after debtors submitted a proposed plan back in August, outlining the strategy for selling off the estate’s cryptocurrency holdings. Under this plan, a financial advisor would oversee the orderly liquidation of the assets. Crucially, the estate would be limited to selling a maximum of $100 million worth of most tokens each week. However, this limit could be subject to modification, potentially increased to $200 million, on a token-by-token basis.
During a hearing on Wednesday, Judge John Dorsey greenlit this plan, signaling the beginning of the endgame for FTX’s troubled financial saga. Notably, when the estate intends to sell high-value tokens such as Bitcoin and Ethereum, it will be required to provide the U.S. Trustee’s office with a ten-day advance notice.
FTX has expressed its intention to use hedging strategies for Bitcoin and Ethereum to mitigate potential adverse impacts from price fluctuations during the sales. However, the application of these hedging practices for other assets will be decided on a case-by-case basis. Additionally, the estate has indicated that it may reserve the right to stake specific tokens, as long as the returns generated from token staking programs contribute to increasing the funds available for creditors.
Legal representatives for the ad hoc committee representing FTX customers voiced their support for this motion. They view it as a means to safeguard and maximize value for the debtors’ estates, demonstrating a collective commitment to ensuring that the creditors receive their due compensation.
During the proceedings, Judge Dorsey raised an important question concerning the traceability of cryptocurrencies held by those who deposited with FTX. This inquiry reflects the broader concern of ensuring a fair and transparent distribution process, especially in the realm of cryptocurrencies where anonymity can be a significant factor.
FTX’s journey into bankruptcy protection began in November, and it currently holds approximately $3.4 billion worth of cryptocurrency assets. With the court’s approval of this asset sale plan, FTX is now on a path toward resolving its financial woes and, in the process, providing a degree of closure to its creditors.
Read more:
- FTX Amasses $3.4 Billion Worth Of Crypto Assets, Including $1.16 Billion In SOL
- FTX Nearing Approval To Liquidate $3.4 Billion In Crypto Assets By September 13th