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NEW YORK: Bankrupt crypto exchange FTX received US court permission on Wednesday (Sep 13) to liquidate cryptocurrency assets, a move the company said would allow it to repay customers in US dollars and minimise 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 US$100 million in cryptocurrency per week and enter into hedging and staking agreements that will allow FTX to minimise 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.
Dorsey allowed FTX to increase its liquidation pace to up to US$200 million per week, if both creditors committees agree.
FTX said in a Monday court filing it owns US$3.4 billion in cryptocurrencies, including US$1.16 billion in Solana, US$560 million in bitcoin, and US$192 million 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 US$7 billion in assets to repay customers, and it is pursuing additional recoveries through lawsuits against FTX insiders and other defendants that received money from FTX before it went bankrupt.
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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