Bankrupt cryptocurrency exchange FTX received permission from a U.S. court on Wednesday to liquidate cryptocurrency assets, a move the company said would allow it to repay customers in U.S. dollars and minimize risks associated with price fluctuations in the cryptocurrency market. U.S. Bankruptcy Judge John Dorsey approved FTX’s proposal during a court hearing in Wilmington, Delaware, allowing FTX to sell up to $100 million (approximately Rs. 829 crore) of cryptocurrency per week and enter into hedging and staking protocol, which will allow FTX to minimize the risk of losing money to price fluctuations and earn passive income on more mainstream crypto assets such as Bitcoin and Ethereum.
FTX’s request was supported by an official committee appointed to represent its bankrupt clients, as well as an ad hoc committee representing non-U.S. clients who deposited money on the FTX.com international exchange. During the hearing, Dorsey dismissed concerns raised by two FTX customers who said FTX sales could cause cryptocurrency prices to plummet and that FTX may not own all the cryptocurrencies held in their accounts.
FTX said in court documents that it is acutely aware of the risk that its efforts to liquidate the tokens could alter the crypto market. The company said it has hired U.S. cryptocurrency firm Galaxy as an investment adviser, in part to manage the risk of “information leaks” leading to short-selling activity and sharp falls in cryptocurrency prices. But keeping its current cryptocurrency portfolio intact also carries risks, and FTX may be forced to hold certain assets as prices fall, according to FTX’s court filing.
Dorsey allowed FTX to increase the liquidation pace to $200 million (approximately Rs. 1,659 crore) per week if both creditor committees agree.
FTX said in a court filing on Monday that it holds $3.4 billion (approximately Rs 28,214 crore) in cryptocurrencies, including $1.16 billion (approximately Rs 96,256 crore) in Solana, $560 million (approximately Rs 46,450 million) rupees) in Bitcoin and $192 million in Bitcoin. Approximately Rs 1,592 Crore) in Ethereum.
FTX filed for bankruptcy in November 2022 after misusing and losing billions of dollars worth of customer cryptocurrency deposits. FTX has recovered more than $7 billion (approximately Rs 58,069 crore) in assets to repay customers and is seeking more recoveries by filing lawsuits against FTX insiders and other defendants who received funds before FTX went bankrupt.
FTX founder Sam Bankman-Fried has pleaded not guilty to charges of defrauding FTX customers by using their funds to support his own high-risk investments. Other former FTX executives have pleaded guilty to criminal charges.
© Thomson Reuters 2023
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