FTX plans to refund "dollars," plans to hedge BTC, ETH, and gradually liquidate $3 billion in cryptocurrencies.
FTX reorganizes its team in hopes of refunding creditors in the form of "USD," while also planning to hedge against BTC and ETH when liquidating $3 billion worth of crypto assets to mitigate volatility and downside risks, maximizing value.
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FTX Asset Liquidation to be Handled by Galaxy Digital
According to legal documents, the restructuring team has filed a motion with the court seeking authorization for FTX to enter into an investment services agreement with the cryptocurrency investment firm Galaxy Digital.
Under the investment agreement, Galaxy Digital's management will have the authority to execute transactions such as options, futures, collateral, redemptions, and other related financial operations.
Galaxy Digital will receive two management fees monthly:
- Liquidation fee: Total earnings from liquidating assets
- Hedging fee: Average net asset value of hedged assets
FTX believes that Galaxy Digital possesses the expertise to discreetly sell large amounts of cryptocurrency assets without disrupting the market.
Repayment to Creditors in "Fiat Currency"
The FTX restructuring party also presented another motion seeking authorization to hire an investment advisor to assist FTX in selling up to $200 million of cryptocurrency assets weekly and planning hedges for eligible assets such as BTC and ETH.
The restructuring party also aims to refund creditors in fiat currency rather than BTC or ETH, stating it is to "avoid devaluing $3 billion in cryptocurrency assets."
Previously, the Unsecured Creditors Committee (UCC) accused the restructuring team of not properly utilizing idle cash.
Uncertain whether the UCC's demands had an impact, the FTX restructuring team mentioned in this instance that they are looking to collateralize idle cryptocurrency assets to earn passive income.
FTX: A Win-Win for Restructuring Entity and Creditors
The lawyer for the FTX restructuring team stated:
Hedging BTC and ETH can mitigate potential downside risks for the restructuring party before selling cryptocurrency assets; collateralizing cryptocurrency assets can generate low-risk returns from idle assets, which will be beneficial for the bankruptcy management entity and ultimately more favorable for creditors.
The above plan is still pending review, and the bankruptcy court needs to assess whether Galaxy Digital, as an investment broker, aligns with the best interests of FTX and creditors.