Bankrupt FTX is exploring options to optimize the handling of its $3 billion crypto holdings. This includes venturing into staking, as well as implementing strategies to hedge sales of BTC and ETH during the liquidation process. To assist in this endeavor, FTX is considering enlisting the expertise of Mike Novogratz’s Galaxy enterprise, aiming to maximize the value derived from these transactions.
Rather than returning funds to creditors in cryptocurrency, FTX is aiming to do so in fiat currency. However, the company aims to execute trades judiciously to preserve the value of its substantial crypto holdings. According to FTX’s legal filing, hedging BTC and ETH positions will serve to mitigate potential downside risks prior to their sale. Additionally, staking specific digital assets is seen as a means to generate secure returns on assets that would otherwise remain idle.
FTX’s intention is to augment the amount it can distribute to customers awaiting reimbursement by accruing interest on its crypto holdings. With John J. Ray III, a restructuring expert, now at the helm, there is concern that selling all assets at once could precipitate a sharp price decline, potentially benefiting short sellers and other market participants. To navigate this, FTX is consulting market experts on strategies like implementing weekly sales limits.
The document notes that Galaxy Asset Management possesses significant expertise in relevant areas of digital asset management and trading. This includes proficiency in the types of transactions and investment objectives envisaged. Galaxy Digital, another component of Novogratz’s conglomerate, has previously disclosed substantial investments in FTX at the time of its bankruptcy. New filings outline the procedures in place to manage potential conflicts of interest and ensure that asset managers act in FTX’s best interests.
In an April filing, FTX reported holdings of major, highly liquid crypto assets valued at $3.4 billion. In July, the company indicated its intent to convert crypto holdings into cash before initiating reimbursements to customers, with the possibility of international customers accessing a revamped exchange. In contrast, other bankrupt crypto firms like Celsius have opted to distribute assets in liquid cryptocurrencies, including BTC and ETH.
These proposed measures await approval from a Delaware bankruptcy court. Earlier on Wednesday, it was revealed that the company was incurring legal fees of $1.5 million per day as it navigates the winding-up process. On Tuesday, FTX founder Sam Bankman-Fried entered a not guilty plea to a revised set of fraud charges related to his management of the company.