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FTX Secures Court Approval to Sell $873M Trust Assets to Pay Creditors

FTX emphasized the critical nature of liquidating these assets to mitigate potential market downturns, maximize estate value, and facilitate planned dollarized distributions to creditors.

The Delaware bankruptcy court has granted approval to cryptocurrency exchange FTX for the sale of its trust assets, totaling more than $873 million. This move is aimed at satisfying the claims of creditors as part of FTX's ongoing bankruptcy proceedings.

The bankruptcy court's approval, as stated in the November 29 filing, pertains to the sale of trust assets that were valued at $744 million as of October 25. Notably, the current valuation has surged to approximately $873 million, indicating an increase in asset value over time.

FTX's trust assets earmarked for sale primarily consist of its stakes in various trusts issued by Grayscale Investments, valued at $807 million. Additionally, FTX will source $66 million worth of assets from Bitwise, a custody service provider.

FTX owns over 22 million units of Grayscale's Bitcoin Trust (GBTC), valued at $691 million, and over 6.3 million units of Grayscale's Ethereum Trust (ETHE), valued at $106 million. The remaining three trusts eligible for sale are Grayscale’s Ethereum Classic Trust, Litecoin Trust, and Digital Large Cap Trust.

FTX's Rationale for Asset Liquidation

In a court filing on November 3, FTX expressed its intention to sell Grayscale assets held at Grayscale and Bitwise. The company claimed that liquidating these assets is necessary to avoid price declines, maximize the value of FTX's estates, and facilitate future dollarized distributions.

FTX believes this strategic monetization of trust assets demonstrates sound business judgment, minimizing market risk and preparing estates for distributions.

Recovery Efforts and Ongoing Bankruptcy Proceedings

Under new leadership, FTX has been working to find and recover assets within a complex debt network owed to various creditors, including customers who invested cash and cryptocurrency on the platform.

Court documents reveal that FTX's administrators have successfully recovered approximately $7 billion in assets, including $3.4 billion worth of cryptocurrency. 

Despite these efforts, the path to resolution is ongoing, and the founder of FTX, Sam Bankman-Fried, faces legal challenges, having been found guilty on all seven charges by a jury last month. The potential consequences include a sentence of more than 100 years' imprisonment.

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