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- FTX, despite facing bankruptcy, aims to initiate staking while also employing hedging strategies for BTC and ETH sales during the process of liquidating a $3 billion cryptocurrency portfolio.
- It's seeking the expertise of Mike Novogratz's Galaxy empire to optimize the value extracted from the sales.
FTX, a crypto exchange that has faced bankruptcy, is exploring avenues to capitalize on its substantial cryptocurrency holdings through sales, staking, and hedging strategies. In a recent court filing on Wednesday night, the exchange expressed its intention to enlist the expertise of Galaxy, led by Mike Novogratz, as an advisory partner to navigate and implement these initiatives.
FTX, which experienced a major collapse in November of the previous year, intends to reimburse its creditors using traditional fiat currency instead of bitcoin (BTC) or ether (ETH). The company is optimistic that strategic trading approaches will prevent any significant reduction in the value of its extensive crypto holdings, which amount to over $3 billion.
“Hedging bitcoin and ether will allow the Debtors [FTX] to limit potential downside risk prior to the sale of such bitcoin or ether,” the filing by FTX lawyers said. “Staking certain digital assets… will inure to the benefit of the estates — and, ultimately, creditors — by generating low risk returns on their otherwise idle digital assets.
FTX aims to leverage the interest generated from its cryptocurrency holdings to augment the stock that can be allocated to customers still awaiting refunds. Under the leadership of restructuring specialist John J. Ray III, the company is concerned that liquidating its holdings all at once could trigger a substantial price drop. This outcome would favor short sellers and other players in the market. Consequently, the company is seeking advice from market professionals to devise optimal strategies for sidestepping this situation, such as implementing weekly sales limits.
“Galaxy Asset Management has extensive experience in areas relevant to digital asset management and trading, including with respect to the types of transactions and investment objectives contemplated,” the document said, referring to the Security and Exchange Commission-approved investment advisor that forms part of Mike Novogratz’s crypto conglomerate.
In the past, Galaxy Digital (GLXY), another component of the same conglomerate, openly stated that it had tens of millions of dollars invested in FTX when FTX faced financial difficulties. Newly submitted documents now outline the protocols for managing conflicts of interest, guaranteeing that the asset managers will prioritize FTX's best interests.
In their April submission, the FTX firm reported possessing major, highly liquid crypto assets valued at $3.4 billion. By July, they projected the conversion of their cryptocurrency holdings into cash as a preliminary step before reimbursing their clientele, although customers from other countries might gain access to a restructured trading platform. Similarly, defunct crypto enterprises like Celsius, which operates as a lending platform, have chosen to distribute assets in easily tradable cryptocurrencies like BTC and ETH.
The approval of the requests is contingent upon the endorsement of a Delaware bankruptcy court. This court, on the preceding Wednesday, was apprised that the company was incurring a daily expense of $1.5 million in legal fees as it endeavors to conclude its affairs. Additionally, on Tuesday, Sam Bankman-Fried, the founder of FTX, entered a plea of not guilty to a revised set of fraud charges associated with his stewardship of the company.
