FTX unveils $100m weekly crypto liquidation strategy

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FTX has presented the bankruptcy court with a revised plan for selling and transferring its significant digital assets amid its Chapter 11 proceedings.

The newly outlined order delineates a systematic approach for investment advisors to oversee the liquidation of a portion of FTX’s cryptocurrency assets under the watchful eyes of creditors.

Initially, the sale of high-value assets such as Bitcoin (BTC) and Ethereum (ETH) will be capped at $50 million per week, expected to escalate to $100 million in the subsequent weeks.

Moreover, the proposal introduces stringent regulations for selling digital tokens affiliated with insiders. Before proceeding with the sale of such assets, FTX must notify both the creditors and the US Trustee at least ten days in advance. This move allows for potential objections that could halt the sale process.

FTX also seeks the green light to initiate cryptocurrency hedging contracts facilitated through an approved investment advisor. Currently, the assets eligible for these contracts are confined to Bitcoin and Ethereum, with any expansion requiring the nod from creditors.

To foster transparency, FTX must furnish detailed reports biweekly and monthly, encapsulating information on asset transactions, balances, staking yields, and market analyses. Regular status calls involving FTX, investment advisors, and creditors are also on the cards to ensure an open line of communication.

This development follows the downfall of Sam Bankman-Fried’s crypto empire, which filed for bankruptcy in November 2022, crippled by a liquidity crisis that saw a staggering $6 billion withdrawn within a week. The proposed asset sales are viewed as a vital step towards securing essential capital to settle debts with FTX creditors and clients.

Under new stewardship, FTX is gearing up to broaden its algorithmic trading operations as a strategy to augment revenue. The company has declared having a substantial $1.2 billion in liquid assets. The bankruptcy court is set to scrutinize the guidelines for digital asset sales before approving.

FTX’s diverse asset portfolio

This revised filing is hot on the trails of a report released on Sep. 11, which shed light on FTX’s expansive asset portfolio, spanning cryptocurrencies, real estate, and securities. The report revealed dominant holdings in Solana valued at $1.16 billion and Bitcoin assets worth $560 million.

Furthermore, FTX has investments amounting to hundreds of millions in lesser-known tokens, which currently do not meet liquidity benchmarks. The company’s venture investment portfolio is robust, amounting to approximately $4.5 billion, including collaborations with prominent crypto entities such as Kraken and SkyBridge.

FTX’s asset portfolio also extends to the luxury real estate sector in the Bahamas, valued at $200 million, and securities investments amounting to $529 million, primarily channeled through Grayscale’s cryptocurrency products.

Despite the ongoing financial turmoil, the remnants of Bankman-Fried’s empire are estimated to be worth around $7 billion.

As FTX embarks on liquidating a segment of these assets per the proposed guidelines, it aims to recover its financial stability, which was shaken following the bankruptcy filing last November. Nevertheless, a convoluted restructuring journey lies ahead, with mediation processes still underway involving various creditors and stakeholders.

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