A Delaware district judge approved an order allowing bankrupt crypto exchange FTX to sell off billions of its cryptocurrency to be distributed to creditors.
Debtors filed a proposed plan in August, under which the estate’s token sales would be guided by a financial advisor. The estate would only be permitted to sell $100 million per week of most tokens, though that limit could be permanently raised to $200 million on a token-by-token basis.
Judge John Dorsey approved that plan during a hearing on Wednesday.
When selling bitcoin, ether and other tokens, the estate would be required to give the U.S. Trustee’s office 10 days notice.
FTX said it wants to hedge bitcoin and ether to minimize the impact of price movement on the proceeds from the sale, though other assets could be approved as hedges again on a token-by-token basis. The estate also said it reserves the right to stake certain tokens, provided that the returns from token staking programs would help return more funds to the creditors.
A lawyer representing the ad hoc committee for FTX customers said they were supportive of the motion “as a way to preserve and maximize value for the debtors’ estates.”
The judge then asked about the traceability of crypto for those who deposited with FTX.
A lawyer representing FTX said there was no way to trace individual crypto to individual customers.
“It’s all part of one pool,” he said. “There are assets that are associated with the exchange, we call the dot com customer pool and the U.S.pool, but they don’t necessarily match customer entitlements.”
“So when we dispose of this, we’ll be turning it into cash effectively, and the cash will be available for distribution pursuant to the plan,” he added.
FTX filed for bankruptcy protection in November and holds $3.4 billion in crypto holdings.
Jitters about the possible sales have pushed some alt coins to trend lower over recent days. Bitcoin's price was up on Wednesday, rising 0.7% over the past 24 hours to $26,180 at 1:46 p.m. ET, according to CoinGecko.
Updated to include additional details
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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