Bankrupt FTX reveals $100M weekly crypto liquidation plan in court filing

FTX submitted a revised order to the bankruptcy court early on Sept. 13 outlining proposed guidelines for selling and transferring its substantial digital asset holdings as part of its ongoing Chapter 11 proceedings.

The revised order outlines a structured process for investment advisors to liquidate portions of FTX’s cryptocurrency stash under creditor oversight. According to the filing, sales of assets like Bitcoin and Ethereum would be subject to limits of $50 million weekly for the first couple of weeks, rising to $100 million weekly after that.

Stricter controls are proposed for unidentified “insider-affiliated” digital tokens. The exchange must provide 10 days advance notice to creditors and the U.S. Trustee before selling such assets, which could be blocked if objections are raised.

FTX also seeks permission to enter into cryptocurrency hedging contracts using an approved investment advisor. Eligible hedging assets are currently limited to Bitcoin and Ethereum, requiring creditor approval to expand.

The company must provide creditors and regulators with detailed biweekly and monthly reports on asset transactions, balances, staking yields, and market insight. Status calls between FTX, advisors, and creditors would also facilitate transparency.

Sam Bankman-Fried’s fallen crypto empire filed for bankruptcy on Nov.11, 2022, leveled by an apparent liquidity crisis after $6 billion in withdrawals in a week. The proposed sales could provide a crucial capital infusion to repay FTX creditors and customers.

FTX’s new leadership plans to expand its algorithmic trading business to boost revenue. It reports over $1.2 billion in cash on hand. The bankruptcy court will review the digital asset sale guidelines and decide whether to approve them.

FTX assets.

The revised court filing comes on the heels of a Sept. 11 report detailing FTX’s extensive asset portfolio across various cryptocurrencies, real estate, and securities. According to the earlier documents, FTX holds over $3.4 billion in digital assets, including dominant positions in Solana worth $1.16 billion and Bitcoin worth $560 million.

The company also maintains hundreds of millions in lesser-known tokens that “fail to meet liquidity thresholds,” the prior article noted. FTX’s substantial venture investment portfolio totals around $4.5 billion, encompassing partnerships with major crypto firms like Kraken and SkyBridge.

Additionally, FTX owns $200 million in luxury Bahamas real estate and $529 million in securities, largely through Grayscale’s crypto products. The remains of Sam Bankman-Fried’s empire stand at an estimated $7 billion in total assets.

Liquidating a portion of these holdings through the proposed sale guidelines could help FTX regain its financial footing after filing for bankruptcy on Nov. 11 amidst an apparent liquidity shortfall. However, the company still faces a complex restructuring path, with mediation ongoing between disparate creditors and stakeholders.