Cryptocurrency exchange FTX, which faced bankruptcy in November last year, is now seeking to sell, bet on, and mitigate the risk of its sizable cryptocurrency portfolio. It’s currently looking into hiring Galaxy, led by Mike Novogratz, as an advisor to assist in this endeavor, according to court documents filed on Wednesday, August 24th.
FTX aims to repay its creditors in fiat currency instead of Bitcoin (BTC) or Ether (ETH), hoping that careful trading can prevent the devaluation of over $3 billion worth of cryptocurrencies it holds.
“Bitcoin and Ether risk hedging will allow the debtor [FTX] to limit potential price reduction risks before selling bitcoin or ether,” stated FTX’s lawyers. “Depositing certain digital assets will benefit the assets – and ultimately the creditors – by creating low-risk profits for their idle digital assets.”
FTX is banking on profits from its cryptocurrency portfolio to further increase the pool of shares it can distribute to customers still waiting to receive their funds. The company, currently overseen by restructuring expert John J. Ray III, is concerned that a sudden sell-off could lead to a sharp price drop, benefiting short sellers and other market participants. They are seeking market experts’ advice to determine the best way to avoid this, such as through imposing weekly trading limits.
“Galaxy Asset Management has a lot of experience in areas related to managing and trading digital assets, including trading types and projected investment targets,” the document stated, referring to the investment advisor approved by the U.S. Securities and Exchange Commission, part of Mike Novogratz’s cryptocurrency empire.
Galaxy Digital (GLXY), another branch of the empire, previously declared that they had tens of millions of USD linked to FTX at the time of its bankruptcy and new records detail procedures for conflict-of-interest safeguards to ensure asset managers act in compliance. FTX’s best interest.
In an April filing, FTX revealed that they had a substantial cryptocurrency portfolio with a liquidity value of $3.4 billion. In July, they indicated they were planning to convert cryptocurrencies to cash before returning it to customers, although international customers could access a relaunched exchange. Other bankrupt cryptocurrency firms like Celsius have opted for distribution involving liquid cryptocurrencies, including BTC and ETH.
The requests must be approved by the Delaware bankruptcy court, which noted on Wednesday that legal fees had caused the company to pay $1.5 million per day. On Tuesday, FTX co-founder Sam Bankman-Fried did not plead guilty to a series of fraud charges related to managing his company.
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Cryptocurrency exchange FTX, which went bankrupt in November, wants to sell its large cryptocurrency holdings to repay creditors. They’re considering hiring Galaxy, led by Mike Novogratz, for advice. FTX aims to avoid selling Bitcoin and Ether by hedging their risks. They hope to profit from their cryptocurrency holdings to repay customers waiting for funds. FTX is worried that selling too quickly could lower prices. Galaxy has experience in managing digital assets. Other companies like Celsius have distributed cryptocurrency to repay creditors. FTX’s requests need court approval. Legal fees have cost them $1.5 million per day. FTX co-founder Sam Bankman-Fried faces fraud charges.