Debtors of the defunct FTX Derivatives exchange have initiated a novel move by requesting the US bankruptcy court in Delaware to authorize the sale of trust assets, which comprise funds managed by Grayscale Investments and Bitwise, totaling an estimated $744 million.
Rationale Behind FTX Proposed Trust Sales
This request, revealed in a recent court filing, outlines a strategic plan to expedite creditor distributions and maximize returns for stakeholders. The debtors argue that selling the trust assets to one or more buyers through the sale procedures will help avoid the cost and time delays associated with filing separate motions for each proposed sale.
Given the fast-paced nature of the crypto market, efficiency in asset liquidation is crucial to maximize returns. “The Debtors’ proposed sale(s) or transfer(s) of the Trust Assets will help allow the estates to prepare for forthcoming dollarized distributions to creditors and allow the Debtors to act quickly to sell the Trust Assets at the opportune time,” the filing stated.
These assets held in various Grayscale Trusts, with an estimated total value of $691 million, as well as an additional trust managed by Bitwise, valued at $53 million are based on their market value as of October 25.
Notably, trust assets offer investors a way to gain exposure to digital assets without owning them directly. They have played a crucial role in facilitating investments in cryptocurrencies while providing a level of security and oversight.
In addition to utilizing an investment adviser, the debtors have proposed the formation of a pricing committee composed of all stakeholders. Involving various stakeholders in the pricing process helps to ensure transparency and fairness. It enables multiple perspectives and expertise in determining the best timing and conditions for asset sales.
Furthermore, the investment adviser will be required to obtain a minimum of two bids from different counterparties before finalizing the sale of assets. This requirement is intended to create a competitive environment that benefits the estate, creditors, and the wider crypto community.
FTX’s Troubled History
FTX was once one of the world’s largest crypto exchanges before its abrupt bankruptcy in November last year. The company’s downfall was accelerated by reports that uncovered customer fund misappropriation in the firm, through its sister’s hedge fund, Alameda Research LLC.
The founder of FTX, Sam Bankman-Fried, has also faced legal troubles, recently being found guilty of defrauding customers and lenders. While the potential sentence could be as high as 115 years in jail, experts suggest that the realistic verdict could be between 15 to 20 years, pending sentencing on March 28, 2024.
Amid this development, FTX’s claim price increased by 57%. A claim, at its most basic definition, denotes a right to a specific sum of money. When a business faces financial difficulties or bankruptcy, creditors assert their claims in an attempt to recoup some of their investment.
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