After its bankruptcy in the previous year, FTX, the once-prominent crypto exchange, is charting a strategic roadmap to liquidate, stake, and hedge its significant crypto assets. Recent court filings reveal FTX’s intent to employ the expertise of Galaxy, spearheaded by Mike Novogratz, for advisory purposes.
Returning FTX Funds: Crypto vs. Fiat Currency
Rather than reimbursing creditors through popular cryptocurrencies like bitcoin (BTC) or ether (ETH), FTX aims to convert these assets into fiat currencies. Their objective is clear: careful crypto trading to preserve the value of their $3 billion-plus holdings.
FTX’s attorneys elucidated in the filing, “By hedging bitcoin and ether, FTX aims to minimize potential risks before selling these assets. Staking specific cryptos offers a low-risk return on these otherwise dormant assets, benefiting the estates and eventually the creditors.”
FTX’s vision is to leverage the accrued interest from its crypto assets to enrich the reservoir it intends to reimburse to its awaiting clientele. The leadership under restructuring specialist John J. Ray III has voiced concerns over mass selling. They believe liquidating all assets simultaneously could negatively impact the market, causing prices to nosedive. That would be advantageous for short sellers but detrimental to most. Thus, they are soliciting guidance from market maestros, contemplating tactics such as capping weekly sales.
Galaxy’s Involvement and Expertise
“Galaxy Asset Management boasts a wealth of digital asset management and trading knowledge. Their proficiency aligns with the envisioned transaction types and investment goals,” the court document elucidated. This nod of approval is towards the SEC-endorsed investment consultant, a segment of Mike Novogratz‘s vast crypto network.
However, it’s worth noting Galaxy Digital (GLXY), a facet of Novogratz’s enterprise, previously admitted to having significant investments in FTX pre-bankruptcy. New documentation highlights measures ensuring Galaxy’s fiduciary responsibility to FTX’s welfare.
FTX’s Crypto Valuation and Future Plans
In a report from April, FTX announced possessing liquid crypto assets valued at approximately $3.4 billion. By July, plans were underway to convert these assets into cash for client reimbursement, albeit international clients might have access to a revived exchange. Contrarily, other bankrupt crypto entities like lender Celsius chose to compensate using liquid crypto assets like BTC and ETH.
FTX’s strategic initiatives await the green light from a Delaware bankruptcy court. Legal challenges persist, with fees reportedly draining FTX of $1.5 million daily. In a recent development, FTX’s founder, Sam Bankman-Fried, contested updated fraud allegations concerning his company leadership.
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