Bankrupt crypto exchange FTX and its debtors are seeking the approval of the U.S. bankruptcy court in Delaware to offload valuable trust assets, including funds managed by Grayscale and Bitwise, with a combined estimated worth of $744 million.
According to the filing, the sale or transfer of these trust assets is essential to help the estates prepare for upcoming distributions to creditors in dollarized form. It will also enable FTX and its debtors to expedite the sale of these assets when the time is ripe. This approach is expected to streamline the process, avoiding the need for separate motions for each proposed sale.
The trust assets in question are held in five Grayscale Trusts, collectively valued at approximately $691 million, and one trust managed by Bitwise, worth $53 million, as of October 25, 2023. These trusts offer investors a means of gaining exposure to digital assets without the need to directly own these assets.
The debtors have justified their decision, stating that it is aimed at proactively managing the risk of price fluctuations, ultimately safeguarding the value of the Trust Assets. Their goal is to maximize returns for creditors and ensure a fair distribution of funds as part of the debtor’s plan of reorganization.
In addition to employing an investment adviser, the debtors have proposed the establishment of a pricing committee that represents all stakeholders. The investment adviser will also be mandated to obtain at least two bids from different counterparties before proceeding with the sale of the assets.
FTX Founder Sam Bankman-Fried Found Guilty
Notably, FTX founder Sam Bankman-Fried recently faced legal trouble, with a jury finding him guilty of defrauding customers and lenders. He was convicted on multiple counts, including wire fraud, securities fraud, commodities fraud conspiracy, and money laundering conspiracy.
Bankman-Fried’s sentencing is scheduled for March 28, 2024, with prosecutors offering recommendations while the final decision rests with Judge Lewis Kaplan. The potential sentences for his crimes range from five to 20 years in prison, making this a significant chapter in the world of crypto and finance.
U.S. Attorney Damian Williams characterized Bankman-Fried’s actions as a “multibillion-dollar scheme” designed to establish himself as the “king of crypto,” making it one of the most substantial financial frauds in American history.