The long-anticipated possibility of FTX restarting its operations after the bankruptcy process has been abruptly dismissed. According to the lawyers representing the defunct exchange, FTX will now move forward with dissolving the company once all debts have been paid off. This news may undoubtedly disappoint investors who had hoped for a revival and potential recovery of their assets.
While full repayment of creditors is still not guaranteed, it is considered an achievable objective by Andrew Dietrich, one of the legal representatives for FTX. However, it is crucial to note that creditors will only receive the dollar value of their crypto holdings. Despite the disappointment this may bring to investors who have seen the value of their assets increase since the exchange’s collapse, it is precisely this increase that has made the full refunds possible in the first place. The solution, from a legal standpoint, aligns with bankruptcy laws and regulations.
In the midst of finalizing the funds to be paid out to creditors, FTX’s legal team has secured yet another deal. They are currently in the process of selling Digital Custody Inc., a company owned by FTX, to CoinList for a mere $500,000. CoinList’s CEO, Terrence Culver, will provide the funds for this transaction. However, there’s a significant catch – Terrence Culver is the same individual who initially sold Digital Custody to FTX for a total of $10 million. This sale took place through two separate transactions in December 2021 and August 2022, each worth $5 million. FTX US acquired Digital Custody to facilitate the safe storage of its own and clients’ assets within the United States. With the winding down of FTX’s business, asset custody is no longer a priority.
The sale of Digital Custody Inc. through a private sale is deemed the most efficient and cost-effective approach to minimize expenses for the estates and maximize value. The legal team justifies this by stating that Digital Custody Inc. has lost its relevance to FTX’s core business, given the sale of LedgerX and the unlikelihood of FTX US being sold or restarted. The committees representing non-US creditors of FTX have also given their approval for this sale. FTX is still open to pursuing alternative transactions until shortly prior to the designated sale date. However, if the buyer withdraws from the deal, a reverse termination fee of $50,000 will be imposed.
As FTX moves closer to settling its debts, the decision to dissolve the company and repay creditors in dollar value has left investors hoping for a different outcome. The sale of Digital Custody Inc. further signifies the winding down of FTX’s operations and the shifting priorities within the organization. Although disappointing for many, the legal actions taken align with bankruptcy laws and regulations. Investors will have to come to terms with the closure of FTX and the loss of potential asset appreciation.
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