Court Grants Approval for FTX Digital Asset Sale

In a pivotal decision rendered on September 13, Judge John Dorsey of the Delaware Bankruptcy Court gave the go-ahead for the sale of FTX digital assets. This approval follows substantial revisions made to the draft order that had been under review just the day before.

Under the newly sanctioned terms, FTX has been granted permission to divest its digital assets, with the exception of Bitcoin, Ether, and select insider-affiliated tokens. These assets will be sold in weekly batches, facilitated by an investment advisor who will operate within predefined parameters. Notably, the initial weekly limit for sales has been set at $50 million, with subsequent weeks seeing an increase to $100 million. There is also provision for elevating the limit to $200 million per week, pending approval from the creditors’ committee and ad hoc committee, or with the explicit consent of the court.

However, the disposition of Bitcoin, Ether, and insider-affiliated tokens will require a separate decision by FTX, with a mandatory 10-day advance notice to both the committees and the U.S. trustee, an appointee of the United States Department of Justice.

All sales, whether of the restricted or unrestricted assets, will be orchestrated through an investment adviser. Information pertaining to these transactions will be closely guarded, accessible only to professionals, with a redacted version available to the public. Should any objections arise from the committees or the U.S. trustee, the sales will be postponed until the objections are resolved or until the court issues an order.

These stringent conditions, introduced in the revised draft presented on September 12, are seen as precautionary measures aimed at maintaining market stability during the influx of FTX assets. However, some observers have pointed out that the sales, in reality, represent only a fraction of the overall trading volume and may not exert significant influence. According to a recent shareholder update, FTX holds digital assets worth $833 million in Bitcoin and Ether.

The guidelines also stipulate that FTX may engage in hedging arrangements involving Bitcoin and Ether, subject to prior approval from the committees, and can utilize them for staking purposes. Notably, the sale of FTX Token FTT remains contingent upon further authorization from the court.

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