FTX Trading Ltd. won court approval to begin selling digital currency from its hoard of $3.4 billion worth of cryptoassets to raise money for creditors who claim they are owed tens of billions of dollars.
(Bloomberg) — FTX Trading Ltd. won court approval to begin selling digital currency from its hoard of $3.4 billion worth of cryptoassets to raise money for creditors who claim they are owed tens of billions of dollars.
Sales are likely to begin even before a lawsuit challenging the company’s ownership of much of the cryptoassets is resolved. A group of non-US creditors backed the sale proposal even though their lawsuit argues that FTX does not own crypto that customers put on the FTX.com exchange.
The company and committees representing both US and foreign creditors have agreed that FTX should sell as much as $100 million of crypto a week, depending on the market prices. The goal is to convert digital assets into US dollars for distribution to creditors once FTX wins final court approval of a payout plan.
“We are not in a rush, but we expect to do it based on market opportunities as the case proceeds,“ Andrew Dietderich, an attorney for FTX said after the court hearing in Wilmington, Delaware.
Since filing for bankruptcy last year, FTX advisors have been tracking down assets and trying to untangle a complex web of debts owed to various creditors, including customers who put cash and crypto on the trading platform.
US Bankruptcy Judge John Dorsey initially questioned whether he should authorize FTX to sell the crypto since some creditors argue it is their property, not an asset of the bankrupt company. Lawyers for the two main creditor groups said that issue should not stop the company from selling crypto when the price is right. Waiting could force FTX to unload crypto in a rush, hurting prices and undermining what creditors would recover.
Under US bankruptcy rules, FTX is allowed to sell the assets even if the ownership is potentially in dispute, Dietderich told Dorsey. Before approving the plan, Dorsey gave FTX creditors watching by Zoom the chance to object. No one spoke against the proposal.
Creditors and FTX are negotiating the details of a payout plan to be submitted to claimants for a vote early next year, Dietderich said in court. Dorsey would take the vote into consideration when deciding whether to approve the plan.
FTX’s administrators have so far recovered about $7 billion in assets, including $3.4 billion of crypto, according to court documents.
The case is FTX Trading Ltd., 22-11068, U.S. Bankruptcy Court for the District of Delaware.
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