The U.S. Department of Justice opposes FTX's motion to sell $3 billion in cryptocurrency assets.

According to a report by Unchained, the U.S. Trustee has objected to the motion to sell over $3 billion worth of cryptocurrency assets in the FTX bankruptcy proceedings.

FTX Refund Plan and Cryptocurrency Liquidation Strategy

The FTX restructuring team filed a motion with the court on 8/23 to refund creditors in "USD" and plans to hedge against BTC and ETH when liquidating $3 billion in cryptocurrency assets to mitigate risks of volatility and price drops, maximizing value. This plan has sparked concerns in the community about asset sell-offs:

Concerned about FTX selling assets? Complete analysis: ETH/UNI/HXRO/FTT Transfer Volume Largest

US Trustee's Opposition to the Motion

In court documents dated September 7, the US Trustee opposed the motion. It objected to FTX's approach to formulating management and monetization guidelines, including failure to notify parties outside the committee representing unsecured creditors and the special committee for non-US creditors of changes in relevant amounts or types of cryptocurrencies that could be sold.

The United States Trustee is an office within the Department of Justice that represents the government in bankruptcy proceedings. Its main role is to act as a "supervisor" in the process and oversee the actions of the bankrupt party.

Representing the case, Andrew Vara stated in the documents:

If the debtor has a legitimate business reason for not wishing to disclose this type of information, the debtor should disclose the reason, but at a minimum, the United States Trustee should be included in the list of those notified of such changes.

Unclear Plans for FTX Asset Sales

The US Trustee stated that FTX violated Rule 4001-2, which applies to all cash collateral and financing requests under Sections 363 and 364 of the Bankruptcy Code. The rule requires certain disclosures in any motion seeking financing, including the amount of cash collateral required by the debtor and pricing and economic terms. Essentially, the court believes that FTX did not make it clear how these assets would be sold without affecting the creditors.

FTX's motion plans to sell up to $1 billion in digital assets weekly, with the possibility of temporary increases to $2 billion with approval from the committees. The debtor intends to employ various strategies to prevent its recovered cryptocurrency assets from adversely affecting market prices.

However, Andrew Vara stated:

The debtor has not demonstrated the necessary responsibility to fulfill the Superpriority Administrative Expense claim for protecting assets.

The motion should be denied until it is submitted and disclosed, providing an opportunity for stakeholders to oppose it.

Note: A Superpriority Administrative Expense Claim is any claim filed against each debtor on a joint basis that takes priority over any and all other administrative expense claims granted under a cash collateral order or hedging collateral order.

Hearing Date Set for September 13

The hearing regarding FTX's motion is scheduled for September 13.