Court Grants FTX Permission to Liquidate and Diversify Crypto Holdings for Creditor Repayment

FTX, the bankrupt cryptocurrency exchange, has received court approval to sell, stake, and hedge its cryptocurrency holdings, including Bitcoin (BTC) and Solana (SOL). This move is aimed at repaying creditors, and it has been greenlit by Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware.

Court's Decision: 

During a court hearing, Judge Dorsey approved FTX's motion to sell, stake, and hedge its crypto assets, valued at over $3.4 billion. Two objections opposing the plan were overruled. An attorney representing the ad hoc committee of FTX customers expressed support for the plan, emphasizing the need to expedite the process. The judge's decision allows FTX to proceed with these activities to meet its creditor obligations.

FTX's Argument: 

FTX had initially submitted a filing in August, justifying the need for these actions. They argued that hedging crypto assets would limit potential downside risks before selling Bitcoin or Ether. Additionally, staking certain digital assets would generate low-risk returns on otherwise idle assets, benefiting both the estate and creditors.

Asset Pool Considerations: 

The judge inquired whether FTX could identify the depositors of these assets. FTX's legal representation clarified that the digital assets being sold were considered assets of the debtors, and they were not traceable to individual customers. All these assets were held within a single pool.

Adviser Appointment: 

FTX also sought approval to hire Mike Novogratz from Galaxy Digital as an adviser.

FTX's Crypto Holdings: 

FTX recently disclosed holding approximately $1.16 billion worth of Solana (SOL), equivalent to around 16% of the token's total supply, along with approximately $560 million in Bitcoin (BTC). The rest of their holdings consist of lesser-known, illiquid tokens.

In conclusion, the court's decision to allow FTX to liquidate and diversify its cryptocurrency holdings is a significant step toward repaying creditors and resolving the bankruptcy proceedings. This move reflects the evolving landscape of crypto asset management within the legal framework.