FTX, the once-prominent cryptocurrency exchange, has now abandoned its plans to restart its operations following the bankruptcy process. The decision has been made to dissolve the company entirely once all outstanding debts have been paid off. Andrew Dietrich, a lawyer representing FTX, has acknowledged that while there is no guarantee of repaying creditors in full, it remains a viable objective. However, creditors will only receive the dollar value equivalent of their crypto holdings, which might disappoint some investors who have witnessed an increased value of their assets since the exchange’s downfall. Nevertheless, this approach aligns with bankruptcy law and provides a feasible solution for FTX’s financial obligations.
As FTX’s legal team nears completion of the funds tally for repayments, they have recently reached an agreement to sell off one of FTX’s owned entities – Digital Custody Inc. – to CoinList for a nominal sum of $500,000. CoinList’s CEO, Terrence Culver, will provide the necessary funds for the purchase. However, there is an intriguing caveat to this transaction. Terrence Culver is the same individual who originally sold Digital Custody to FTX for a substantial amount of $10 million. The sale took place through two separate transactions – one in December 2021 and another in August 2022 – each valued at $5 million. FTX US made the acquisition to ensure the safe custody of its assets and those belonging to its clients within the United States. However, since FTX is winding down its business and has no further need for asset custody, the sale of Digital Custody Inc. has become a practical step for FTX in its efforts to minimize costs and settle its obligations.
The committees representing non-US creditors of FTX have provided their consent for the sale of Digital Custody Inc. This approval allows FTX to continue exploring alternative opportunities until shortly before the scheduled date of the sale. In the event that the buyer withdraws from the agreement, a reverse termination fee of $50,000 will be collected.
The decision to sell Digital Custody Inc. aligns with FTX’s objective to maximize the value of assets for the benefit of its creditors while minimizing costs. The sale facilitates an efficient and cost-effective process of wrapping up FTX’s affairs, considering the unnecessary nature of Digital Custody Inc. to the debtors’ business following the sale of LedgerX. Moreover, the prospects of reselling or reviving FTX US appear unlikely.
FTX’s abandonment of its plans to restart operations marks the beginning of its dissolution process. While creditors may feel disappointed by receiving only the dollar value of their crypto holdings, this approach allows for full refunds due to the increased value of these assets. The sale of Digital Custody Inc. to CoinList further supports the objective of settling debts and minimizing costs for FTX. Despite the curious involvement of Terrence Culver in both the initial sale and subsequent repurchase, this transaction serves as a practical and efficient way to maximize the value of FTX’s assets for the benefit of its creditors. With the necessary approvals in place, FTX will continue to navigate this winding down phase until its closure, laying the groundwork for a fresh approach in the cryptocurrency market.
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