Can FTX 2.0 Regain Trust by Repaying $873 Million Assets to Creditors?
In a recent development in the FTX bankruptcy case, the cryptocurrency exchange has received approval to sell approximately $873 million worth of trust assets. The funds obtained from this sale will be directed towards repaying creditors who suffered losses during FTX’s collapse in 2022. This decision was reached in a filing made on November 29 in a Delaware bankruptcy court.
Source of Assets
Order authorizing FTX Trading to sell trust assets. Source: Kroll
The bulk of the approved assets, totaling $807 million, are sourced from FTX’s holdings in various trusts issued by Grayscale Investments, a prominent crypto asset manager. Additionally, a smaller portion, valued at $66 million, is derived from FTX’s stakes in Bitwise, a custody service provider.
Valuation Increase
Although the court document mentions a total of $744 million in assets, this figure is based on a valuation as of October 25, 2023. It is crucial to note that the assets have appreciated in value since that date.
Trusts Approved for Sale
The motion filed by FTX debtors on November 3 sought approval for the sale of six cryptocurrency trusts. These include the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Bitwise 10 Crypto Index Fund. FTX’s ownership includes over 22 million units of GBTC, valued at $691 million, and 6.3 million shares of ETHE, now worth around $106 million.
Additional Trusts Approved
Apart from GBTC and ETHE, FTX has been granted permission to sell assets from Grayscale’s Ethereum Classic Trust, Litecoin Trust, and Digital Large Cap Trust. The goal is to recover funds for FTX customers impacted by the exchange’s downfall.
Asset Recovery Efforts
FTX’s shares in Grayscale and Bitwise were worth $744 million as of Oct. 25, but the valued has increased since. Source: Kroll
Since the collapse of FTX in November 2022, administrators led by John J. Ray III have been diligently working to recover assets. The approved sale of trust assets is part of these ongoing efforts, contributing to the retrieval of approximately $7 billion in assets so far. Notably, almost half of this sum, $3.4 billion, has been recovered in the form of cryptocurrencies.
Total Misappropriation and Legal Developments
In June, FTX debtors estimated that the total amount of customer assets misappropriated during the collapse amounted to $8.7 billion. Meanwhile, the founder of FTX, Sam Bankman-Fried, faced legal consequences, being convicted on seven fraud-related charges on November 2. His sentencing is scheduled for March 28, 2024. Presently, Bankman-Fried remains in Brooklyn’s Metropolitan Detention Center.
The approval for FTX to sell $873 million in trust assets marks a significant step in the ongoing bankruptcy proceedings. As efforts to recover assets continue, the crypto community closely watches legal developments surrounding FTX and its founder, Sam Bankman-Fried, as they navigate the aftermath of the exchange’s collapse in 2022.
