- A Delaware judge has approved FTX’s sale of billions in cryptocurrencies to distribute to creditors
- FTX filed for bankruptcy with around $3.4 billion in crypto holdings
- The exchange will start selling around $100 million per week
A Delaware district judge yesterday granted approval for bankrupt cryptocurrency exchange FTX to proceed with the sale of billions of dollars worth of cryptocurrencies for distribution to its creditors. The debtors submitted a proposal in August outlining the sale of estate tokens under the guidance of a financial advisor, a plan that initially proposed the sale of up to $100 million worth of most tokens per week, with the possibility of raising this limit to $200 million on a token-by-token basis. This plan was approved by Judge John Dorsey, although conditions important conditions apply.
Bankruptcy Rules Require Asset Liquidation
FTX collapsed in November with approximately $3.4 billion worth of cryptocurrencies belonging to creditors, coins which, under bankruptcy law, need to be liquidated in order to meet with bankruptcy law. Those who remember the MtGox saga will know that the bankruptcy trustee in that case began to sell off MtGox’s assets before the exchange was put into civil rehabilitation from bankruptcy, a move that allowed the theoretical return of cryptocurrencies as well as fiat.
The company’s legal representatives expressed their intention to hedge bitcoin and ether to minimize the impact of price fluctuations during the sale, with the option to seek approval for other assets as hedges on a case-by-case basis. The estate also reserved the right to stake certain tokens, with the returns from token staking programs benefiting creditors. The US Trustee’s office must also be informed of any planned token sales ten days before execution.
Representatives of FTX customers’ ad hoc committee supported the motion as a means to preserve and maximize value for the debtors’ estates.
Customer Funds Not Traeable
Some in the crypto community raised concerns about traceability of deposited cryptocurrencies, but an FTX lawyer noted that individual crypto holdings could not be traced back to individual customers as they all belong to a single pool; the assets associated with the exchange, referred to as the dot com customer pool and the U.S. pool, may not necessarily match customer entitlements.
These reassurances may be of little comfort to FTX customers, however, given the data breach that hit FTX and Blockfi customer claims agent Kroll last month. The hack resulted in FTX creditor names, addresses, email addresses, and balances being exposed, with later guidance adding FTX account numbers, Unique IDs and phone numbers into the mix.
