FTX Trading Ltd. Receives Court Approval to Liquidate $3.4 Billion in Crypto Assets for Creditor Relief
FTX Trading Ltd. has secured court authorization to initiate the sale of digital currency from its substantial crypto holdings, valued at $3.4 billion, in order to raise funds for creditors asserting debts totaling tens of billions of dollars.
Sales are expected to commence before the resolution of a lawsuit challenging the company’s ownership of a significant portion of the crypto assets. Surprisingly, a group of non-US creditors has endorsed the sale proposal, despite their ongoing lawsuit contending that FTX lacks ownership of the crypto deposited by customers on the FTX.com exchange.
In agreement with committees representing both US and international creditors, FTX plans to sell up to $100 million worth of crypto weekly, contingent upon market prices. The objective is to convert digital assets into US dollars for equitable distribution among creditors upon obtaining final court approval for a payout plan. Andrew Dietderich, an attorney for FTX, stated, “We are not in a rush, but we expect to do it based on market opportunities as the case proceeds,” following a court hearing in Wilmington, Delaware.
Since declaring bankruptcy last year, FTX advisors have been diligently tracing assets and unraveling a complex network of debts owed to various creditors, including those who deposited cash and crypto on the trading platform.
Initially, US Bankruptcy Judge John Dorsey questioned whether authorizing FTX to sell the crypto was appropriate, given that some creditors argue it belongs to them, not the bankrupt company. However, lawyers representing the two primary creditor groups contended that this issue should not hinder crypto sales when market conditions are favorable. Delaying the sales could force FTX into hurried liquidation, potentially depressing prices and diminishing creditor recoveries. Under US bankruptcy regulations, FTX is permitted to sell assets even if ownership is subject to dispute, Dietderich informed Dorsey. Prior to granting approval for the plan, Dorsey offered Zoom participants the opportunity to voice objections, but no one opposed the proposal.
Negotiations between creditors and FTX are ongoing to finalize the details of a payout plan, which will be presented for claimants’ votes early next year, as confirmed by Dietderich during the court proceedings. Dorsey will consider the vote outcome when deciding whether to approve the plan. To date, FTX’s administrators have recovered approximately $7 billion in assets, including $3.4 billion in crypto, according to court documents.
The case is FTX Trading Ltd., 22-11068, U.S. Bankruptcy Court for the District of Delaware.