After entertaining the possibility of restarting FTX following the bankruptcy process for a long time, lawyers for the defunct exchange have announced that that plan is now scrapped, and the company will simply dissolve once all debts are paid off.
Andrew Dietrich, one of the lawyers representing FTX in the court case, stated that although repayment of creditors in full is not yet guaranteed, it is an objective that is definitely attainable.
Creditors would only be receiving the dollar value of their crypto holdings. This may prove disappointing to investors, as the value of those assets has increased since the exchange went bust. However, it is precisely this development that allowed for full refunds in the first place. Additionally, the solution is legally sound and consistent with bankruptcy law.
Selling The Company Back to The Previous Owner
As company lawyers approach the home stretch in tallying up funds to be paid out, they’ve sealed yet another deal to sell off an FTX-owned entity.
In this case, Digital Custody Inc., a Delaware-based firm with a South Dakota license allowing for custody of digital assets, will be sold for a mere $500,000 to CoinList. The funds will be provided by CoinList’s CEO, a man named Terrence Culver.
However, there’s a catch: Terence Culver is also the man who originally sold Digital Custody to FTX for a total of $10 million.
FTX file motion to sell Digital Custody for $500k which FTX bought for $10m to Terrence Culver (person who sold DCI to FTX for $10m)
A&M (UCC/Ad hoc agrees) says this reflects a fair price for the valuable license from South Dakota that allows it to provide custody pic.twitter.com/QZ8XGVoHQ8
— Sunil (FTX Creditor Champion) (@sunil_trades) February 10, 2024
The sale was conducted via two separate transactions, each worth $5 million, one in December 2021 and one in August 2022.
Digital Assets Is “Of No Use to FTX US”
At the time, FTX US bought the company in order to facilitate custody of its own and client assets within the US.
However, asset custody is no longer a concern for FTX since it will be winding down its business as soon as possible once all debts have been paid off.
“DCI is also no longer useful to the Debtors’ business given the Debtors’ sale of LedgerX and that it is unlikely for the Debtors to sell or restart FTX US. As a result, selling or transferring the Interests pursuant to the proposed Sale Transaction in a private sale is the most efficient and cost-effective way of minimizing costs to the estates while maximizing the value for the benefit of the estates.”
The committees representing non-US creditors of FTX have also signed off on the sale. FTX can continue to look for better deals until shortly before the date of the sale.
If the buyer backs out of the deal, a reverse termination fee of $50k will be collected.
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