Bankrupt FTX gets approval to liquidate crypto assets

Collapsed cryptocurrency exchange FTX has received court authorisation in the US to begin liquidating its substantial holdings of digital tokens, as part of the bankruptcy process.

A Delaware judge on Wednesday approved FTX’s request to sell up to $100 million per week in cryptocurrencies held by the bankrupt firm, and potentially up to $200 million weekly.

The move will allow FTX to start repaying creditors and customers in US dollars while minimising risks from ongoing volatility in crypto markets.

FTX’s lawyers argued the exchange needs to liquidate coins to mitigate exposure to shifting prices as it holds assets like $560 million in Bitcoin. Keeping the current portfolio also carries risks as values could decline.

The company said it has hired crypto firm Galaxy Digital to help manage the liquidation process and prevent large sales from significantly impacting market prices.

FTX filed for bankruptcy last November after a liquidity crisis when concerns emerged over its financial health and trading practices under founder Sam Bankman-Fried.

It so far recovered over $7 billion in assets to reimburse clients affected by the collapse, which wiped out billions in customer deposits. FTX is also pursuing additional recoveries through lawsuits.

Bankman-Fried was charged with defrauding customers and faces trial in October, which he pleaded not guilty to. Other former executives have admitted to criminal conduct related to their roles at the failed exchange.

The approved crypto sales will provide cash to pay back creditors and clients while FTX works through complex bankruptcy proceedings. The liquidations aim to maximize returns by reducing risks.

But the sell-off of large FTX digital asset balances has the potential to impact already fragile crypto markets if not carefully managed. The judge and creditors will closely monitor the unwinding.