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In a major move, the insolvent cryptocurrency exchange FTX and the borrowers connected to it have applied to the Delaware bankruptcy court in the United States for permission to sell trust assets. These assets—more especially, the money from Bitwise and Grayscale—have an estimated value of $744 million. The request is being made while the exchange’s debtors attempt to manage the intricacies of bankruptcy procedures with the assistance of an investment consultant.
The filing states, “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. Additionally, because the Debtors may sell the Trust Assets to one or more buyers in one or more sales, sales pursuant to the Sale Procedures will alleviate the cost and delay of filing a separate motion for each proposed sale.”
Once regarded as one of the biggest cryptocurrency exchanges globally, FTX was embroiled in a dramatic bankruptcy drama in November of the previous year. This financial crisis was sparked by a CoinDesk story that revealed the exchange has been embezzling consumer funds. A jury recently found Sam Bankman-Fried, the exchange’s founder, guilty of cheating lenders and clients, dealing a severe blow to the business.
A provisional sentence date of March 28, 2024 has been set for Bankman-Fried while legal processes are ongoing. Although a 115-year prison sentence is theoretically possible, experts recommend a more practical sentencing range of 15 to 20 years.
The trust assets under consideration are mostly held in one Bitwise-managed trust, worth $53 million, and five Grayscale Trusts, with a total value of about $691 million. The market prices as of October 25, 2023, served as the basis for these valuations. In order to provide investors with exposure to digital assets without taking direct ownership, trusts are essential.
The planned sale is part of the debtors’ proactive attempt to reduce the risk associated with price changes. By protecting the value of the Trust Assets, this strategy seeks to maximize returns for creditors and encourage equitable funding allocation within the debtor’s reorganization plan.