A U.S. court granted permission to bankrupt cryptocurrency exchange FTX on Wednesday to sell off its cryptocurrency holdings, a move that, according to the business, would let it repay customers in dollars and reduce the risk of price volatility in the cryptocurrency markets.
At a hearing in Wilmington, Delaware, U.S. Bankruptcy Judge John Dorsey granted FTX’s request, enabling it to sell up to $100 million worth of cryptocurrencies each week and enter into hedging and staking contracts that will reduce the risk of price volatility and generate passive income on more widely used crypto assets like bitcoin and ether.
The formal committee chosen to represent FTX’s consumers in the bankruptcy and an ad hoc committee that represents non-U.S. clients with deposits on FTX.com’s foreign exchange endorsed FTX’s request.
Two FTX customers who had voiced worries during the hearing that FTX sales would cause a drop in cryptocurrency values and that FTX might not actually possess all of the cryptocurrency it has in its accounts were overridden by Dorsey.
FTX stated in court documents that it was fully cognizant of the possibility that its efforts to dispose coins could affect the cryptocurrency markets. In part to control the danger that “information leakage” may trigger short-selling activity and precipitous drops in the price of cryptocurrency, it claimed it had hired American cryptocurrency firm Galaxy as an investment advisor. FTX’s court documents claim that maintaining its present crypto portfolio has risks, including the possibility of being forced to hold some assets as their prices fall.
If both creditors committees concur, Dorsey permitted FTX to speed up the liquidation process to up to $200 million each week.
In a court document filed on Monday, FTX claimed to control $3.4 billion worth of cryptocurrencies, including $560 million in bitcoin, $192 million in ether, and $1.16 billion in Solana.
Following allegations that it mishandled and misplaced customer cryptocurrency deposits totaling billions of dollars, FTX declared bankruptcy in November 2022. More than $7 billion in assets have been recovered by FTX to pay back consumers, and it is still pursuing additional recoveries through legal action against FTX insiders and other defendants who received funds from FTX prior to its bankruptcy.
Sam Bankman-Fried, the creator of FTX, has entered a not guilty plea to charges that he used customer money to support his own risky investments, defrauding FTX consumers. Other former FTX executives have admitted guilt in relation to criminal accusations.
