Delaware Court Greenlights $900 Million FTX Asset Sales

The value of the assets has soared since the court made its decision.

Will expectation of huge sales prompt a market correction?

FTX has been given permission to sell tens of millions of shares in digital asset trusts, including a large stake in the Grayscale Bitcoin Trust (GBTC), as the defunct exchange's liquidators seek to recover funds for customers who were defrauded when the organization collapsed in 2022.

While the court document listed the total value of the assets in question at $744 million, that figure has since increased significantly as bitcoin recovers above $40,000 and ETH above $2,200. The language of the filing states that the debtors are authorized, but not required, to sell these trust assets, meaning they could hold off sales if they felt that was the best course of action.

80% Of Funds Recovered

So far, liquidators have managed to locate and recover around $7 billion in assets from FTX, around half of which takes the form of cryptocurrencies. Given that the total amount of customer funds lost through Sam Bankman-Fried's mismanagement and misappropriation was $8.7 billion, this means roughly four-fifths of customer money has been recovered.

However, there is a major caveat. When FTX halted withdrawals early in November 2022, bitcoin was languishing around the $16k mark. The price has risen around 150% since then, to the current high of almost $42,000. Just as in the case of MtGox, this makes it easier for liquidators to recover the fiat value of customers' deposits, but means that users will miss out on the money they might have gained simply by holding their crypto from these market cycle lows.

The "FTX Dump"

Bears have suggested that the sales of such large amounts of digital assets might cause a significant correction in the crypto markets. However, such fears have in the past failed to materialize, and bitcoin has posted higher high after higher high over the last year.

Liquidators are unlikely to market dump assets, since they are duty bound to secure the best possible price for customers. It's also likely that they would seek OTC deals, rather than selling on an exchange. In the case of trust assets like GBTC, these are not in any case traded on conventional retail markets.


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