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FTX has authorized the sale of $873 million worth of trust assets to repay creditors following the exchange’s collapse in 2022.
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Grayscale’s flagship products, including GBTC and ETHE, are among the trusts that FTX can liquidate, totaling over $800 million.
Recently, the Delaware Bankruptcy Court granted bankrupt cryptocurrency exchange FTX the authority to sell approximately $873 million worth of trust assets. These assets will be utilized to compensate creditors affected by the exchange’s collapse in 2022, as detailed in the Nov. 29 filing.
Trust assets and their valuation
The $873 million in authorized assets consists primarily of trust interests managed by FTX. grayscale investment, amounting to $807 million. Additionally, $66 million worth of assets from custody service provider Bitwise contribute to the fund.
Court documents reflect an asset valuation of $744 million as of Oct. 25, 2023, but the value of the assets has increased since then.
Trust eligible for sale
FTX has the authority to liquidate holdings of various cryptocurrency trusts, including Grayscale Bitcoin Trust (GBTC). Grayscale Ethereum Trust (ETHE) and Bitwise 10 Crypto Index Fund (BITW). The exchange holds more than 22 million GBTC units worth $691 million and 6.3 million shares of ETHE stock, currently worth about $106 million.
Additionally, Grayscale Ethereum Classic Trust (ETCG), Litecoin Trust (LTCN), and Digital Large Cap Trust (GDLC) are among the trusts that FTX may sell to generate funds aimed at compensating affected customers.
Asset recovery and legal proceedings
Following the collapse of Sam Bankman-Fried’s former empire in November 2022, FTX managers, led by John J. Ray III, have been working diligently to recover its assets. To date, approximately $7 billion in assets have been recovered, almost half of which are in cryptocurrencies, totaling $3.4 billion.
FTX Debtors estimated misappropriated customer assets at $8.7 billion in June. Meanwhile, Bankman-Fried, who was found guilty on seven fraud-related charges on November 2, awaits sentencing scheduled for March 28. He is currently being held at the Brooklyn Metropolitan Detention Center, and recent reports have revealed that Bankman-Fried traded four mackerel for haircuts while in custody.
Legal approvals and future directions
This approval by the Bankruptcy Court is an important step toward FTX liquidating a significant portion of the trust’s assets to repay creditors. It is not yet known how this decision will impact the exchange’s ongoing efforts to recover and redress customers’ financial losses.