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FTX to sell Digital Custody for $500,000 to CoinList, a fraction of its original price

The bankrupt cryptocurrency exchange FTX is looking to sell one of its subsidiaries, Digital Custody Inc. (DCI), to CoinList, a platform for token sales and trading, for a mere $500,000. The deal, which is subject to court approval, represents a huge loss for FTX, which had acquired DCI for $10 million in two installments in 2021 and 2022.

DCI is a company that provides custodial services for digital assets, such as storing, transferring, and securing cryptocurrencies. FTX had intended to use DCI to support its US operations, FTX.US and LedgerX, but the plan was thwarted by the bankruptcy of FTX’s former CEO and founder, Sam Bankman-Fried, in November 2022.

According to the court filing, FTX’s lawyers stated that DCI was never fully integrated into FTX’s ecosystem, and that the company had no value for the debtors’ business after they sold LedgerX and failed to restart FTX.US. The lawyers also claimed that DCI had no other potential buyers, and that the sale to CoinList was the best option to maximize the value of the asset.

The sale is being financed by Terence J. Culver, the original CEO and seller of DCI, who will provide a $500,000 loan to CoinList. Culver will also receive a 10% equity stake in CoinList as part of the deal. The transaction has been approved by the Committee of Unsecured Creditors and the Ad Hoc Committee of Non-US Customers of FTX.com, two groups that represent the interests of FTX’s creditors and customers.

However, the deal is not final yet, as FTX has the right to solicit higher bids for DCI until three days before the hearing date, which is set for February 28, 2024. If FTX finds a better offer, it will have to pay a reverse-termination fee of $50,000 to CoinList. The court will also have to review and approve the sale before it can be closed.

The sale of DCI is part of FTX’s efforts to liquidate its assets and repay its creditors and customers, who are owed more than $1 billion in total. FTX filed for Chapter 11 bankruptcy protection in November 2022, after Bankman-Fried was accused of fraud, market manipulation, and money laundering by the US authorities. Bankman-Fried, who was once the richest person in crypto, is currently facing criminal charges and civil lawsuits.

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