FTX to sell Grayscale, Bitwise Trust assets worth $744 million

Bankrupt cryptocurrency exchange FTX has approached the U.S. Bankruptcy Court in Delaware with a request to authorize the sale of several trust assets, including investments in Grayscale and Bitwise funds, estimated at $744 million.

The court filing also outlines a proposal that could affect the distribution process for creditors of the defunct exchange.

The assets in question consist of holdings in five different Grayscale Trusts, which have a combined value of $691 million, and one trust managed by Bitwise, with an estimated worth of $53 million. These trusts serve as a vehicle for investors looking to gain exposure to digital assets indirectly.

The debtors proposed engaging an investment adviser to oversee the sale process of the trust assets. The appointed investment adviser would be tasked with securing a minimum of two bids from separate entities to facilitate a competitive and transparent sales process.

The court filing reads: “The Debtors’ proposed sale(s) or transfer(s) of the Trust Assets will help allow the estates to prepare for forthcoming dollarized distributions to creditors and allow the Debtors to act quickly to sell the Trust Assets at the opportune time. Additionally, because the Debtors may sell the Trust Assets to one or more buyers in one or more sales, sales pursuant to the Sale Procedures will alleviate the cost and delay of filing a separate motion for each proposed sale.”

This move follows the court’s earlier authorization for FTX to liquidate nearly $3.4 billion in cryptocurrency assets. To mitigate potential adverse impacts on the market, the court directed that these assets be sold in tranches, with each batch not exceeding $50 million to $100 million in value.

“The debtors’ judgment is that proactively mitigating the risk of price swings will best protect the value of the Trust Assets, thereby maximizing the return to creditors and promoting an equitable distribution of funds in the debtor’s’ plan of reorganization,” the filing said.

The development comes hot on the heels of the conviction of FTX founder Sam Bankman-Fried for fraud. While the maximum sentence for his crimes could reach 115 years, legal experts suggest a more realistic term could range between 15 to 20 years. A sentencing hearing is scheduled for March 28, 2024.

Earlier in October, a New York bankruptcy judge agreed to a settlement agreement between FTX and bankrupt crypto lender Genesis Global Capital (GGC).

Following the approval, FTX’s hedge fund, Alameda Research, is set to receive $175 million from the affiliate of Digital Currency Group, the struggling crypto empire whose lending unit filed for bankruptcy in January.