Bankrupt cryptocurrency exchange FTX has been approved to sell a chunk of its trust assets which will be utilised to pay back its creditors.
The greenlight to sell these assets was given by a Delaware bankruptcy court. Its value had recently increased to a total of $873 million as of 25 October.
The move follows the 3 November request made by FTX debtors to sell six cryptocurrency trusts, including Grayscale’s Bitcoin and Ethereum trusts and Bitwise’s Crypto Index Fund.
The collapsed exchange will get some $807 million from Grayscale Investments and $66 million from Bitwise as it owns significant shares in these trusts. It has over 22 million units in Grayscale’s Bitcoin trust and 6.3 million in their Ethereum trust.
The other Grayscale trusts to be included in the recent sales include Ethereum Classic, Litecoin, and Digital Large Cap.
These assets are being used in order to gather funds for affected FTX customers following its bankruptcy in November 2022. Ever since then, FTX’s administrators have recovered around $7 billion in assets with $3.4 billion in cryptocurrencies.
Following a month-long trial, the New York jury found FTX founder Sam Bankman-Fried guilty on all seven counts of fraud and conspiracy to commit fraud in November 2023. The prosecutors successfully made their case in which customer assets misused were found to be a total of $8.7 billion.
The FTX founder has been charged for looting the lump sum from the exchange’s users to exploit a variety of purchases and investments, including real estate, sports sponsorships and venture investments.
Bankman-Fried is now expected to serve up to 115 years behind bars. His tentative sentencing date has been set for 28 March 2024.
The return of 90% of customer funds
Last month, FTX debtors floated a new amended proposal to return an estimated 90% of customer funds.
Called the ‘Amended Plan of Reorganisation and Customer Recoveries Update’, the proposal came into being after a settlement was reached between FTX creditors and debtors.
The FTX Debtors, a group that is currently overseeing the bankruptcy process, has estimated that customers of both FTX and FTX.US could see a majority of assets returned to them.
However, this is subject to the approval by the US Bankruptcy Court by the end of the second quarter of 2024. The group also plans to file the plan by 16 December 2023 for the court’s perusal.
It has also been noted that the customers of both exchanges will not be paid in full. Here, the FTX Debtors anticipated that a greater percentage of losses will be faced by customers of FTX.com. The proposal also talked about how the debtors could potentially exclude any “insiders, affiliates, customers” from the settlement who may have had knowledge of the commingling and misuse of customer deposits and corporate funds.
The chief executive officer and chief restructuring officer of the FTX Debtors, John. J. Ray III, called the amended proposal a “major milestone”. According to him, the debtors and their creditors have created enormous value from a situation that he called the “most challenging financial disaster” that could have easily been a near-total loss for customers.
“I would especially like to recognise the important role of the independent Board of Directors who quickly responded to the call to duty at a time of crisis. They bring wisdom and guidance, often in the face of adversity, that has been and continues to be instrumental throughout the difficult process of bringing order and resolution to these cases”, added Ray.
