FTX Exchange Gets Court Approval to Sell Crypto Assets, Move Will Allow Repayment to Customers

US Court approved FTX's proposal at a hearing in Wilmington, Delaware, allowing FTX to sell up to $100 million (roughly Rs. 830 crore) in cryptocurrency per week.

By Reuters | Updated: 14 September 2023 12:58 IST

FTX Exchange Gets Court Approval to Sell Crypto Assets, Move Will Allow Repayment to Customers

Photo Credit: Reuters

FTX said in a Monday court filing it owns $3.4 billion in cryptocurrencies

Highlights

FTX filed for bankruptcy in November 2022
FTX has recovered more than $7 billion in assets to repay customers
It is pursuing additional recoveries through lawsuits against FTX insider

Bankrupt crypto exchange FTX received US court permission on Wednesday to liquidate cryptocurrency assets, a move the company said would allow it to repay customers in US dollars and minimize risks related to price volatility in crypto markets. US Bankruptcy Judge John Dorsey approved FTX's proposal at a court hearing in Wilmington, Delaware, allowing FTX to sell up to $100 million (roughly Rs. 829 crore) in cryptocurrency per week and enter into hedging and staking agreements that will allow FTX to minimize the risk of price volatility and earn passive income on more mainstream crypto assets like bitcoin and ether.

FTX's request was supported by the official committee appointed to represent its customers in the bankruptcy, and by an ad hoc committee that represents non-US customers with deposits on FTX.com's international exchange. During the hearing, Dorsey overruled concerns raised by two FTX customers who said FTX sales could cause crypto prices to crash and that FTX may not own all of the crypto that it holds in its accounts.

FTX said in court filings it was keenly aware of the risk that its effort to liquidate coins could move crypto markets. It said it had hired US crypto firm Galaxy as an investment advisor in part to manage the risk that "information leakage" would lead to short-selling activity and sharp declines in the price of crypto. But keeping its current crypto portfolio intact also carries risks, potentially locking FTX into holding certain assets as their prices decline, according to FTX's court papers.

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Dorsey allowed FTX to increase its liquidation pace to up to $200 million (roughly Rs. 1,659 crore) per week, if both creditors committees agree.

FTX said in a Monday court filing it owns $3.4 billion (roughly Rs. 28,214 crore) in cryptocurrencies, including $1.16 billion (roughly Rs. 96,256 crore) in Solana, $560 million (roughly Rs. 4,645 crore) in Bitcoin, and $192 million (roughly Rs. 1,592 crore) in Ether.

FTX filed for bankruptcy in November 2022 in the wake of claims that it misused and lost billions of dollars worth of customers' crypto deposits. FTX has recovered more than $7 billion (roughly Rs. 58,069 crore) in assets to repay customers, and it is pursuing additional recoveries through lawsuits against FTX insiders and other defendants who received money from FTX before it went bankrupt.

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FTX founder Sam Bankman-Fried has pleaded not guilty to charges that he defrauded FTX customers by using their funds to prop up his own risky investments. Other former FTX executives have pleaded guilty to criminal charges.

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