FTX Consistently Sells Crypto Assets, Accumulating More Cash

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FTX is consistently selling its crypto assets and accumulating cash

According to Bloomberg, the bankrupt cryptocurrency exchange FTX is actively selling its crypto assets to accumulate more cash, serving its user compensation plan.

Fraud-tainted FTX is unloading crypto and hoarding cash as bankruptcy advisers look for a way to repay customers. https://t.co/qz7Yywz8ig

— Bloomberg Crypto (@crypto) January 27, 2024

Since the court-approved liquidation plan of $3.4 billion in crypto assets in September 2023, FTX’s cash holdings have increased from $2.3 billion at the end of October to $4.4 billion at the beginning of 2024. The cash reserves held by the bankrupt entity overseeing the exchange may be even higher when considering subsidiaries and other liquidated assets.

FTX is also reported to have sold up to $1 billion worth of GBTC shares since the SEC allowed the conversion of this product into a Bitcoin spot ETF in mid-January 2024.

Furthermore, FTX disclosed that it is establishing hedge positions for Bitcoin and investing to earn interest using other coins to increase its cash reserves. The exchange is also contemplating feasible options to restart its trading operations.

FTX still falls short of fully compensating users for 100% of their assets

As the accumulation of cash reserves continues, the value of customer accounts has also been on the rise. Since FTX’s unraveling in November 2022, bankruptcy advisers have actively sought to identify and recover assets to benefit customers with smaller accounts on the platform. This includes pursuing major lawsuits against former associates of Sam Bankman-Fried, the founder of FTX, and other cryptocurrency firms like Bybit Fintech Ltd., which withdrew funds from FTX before its Chapter 11 filing.

It’s important to note that FTX’s financial situation has led to significant changes in the trading prices of customer claims. According to the latest data, claims worth more than $1 million were trading at around 73 cents on the dollar, a notable increase from approximately 38 cents on the dollar in October. However, actual trading prices are influenced by various factors, including the specific value of each claim.

FTX has openly acknowledged that it does not expect to fully repay its customers. Additionally, the company has proposed a model that pegs the value of customers’ digital assets at the time of the bankruptcy filing. This proposal has faced opposition from dozens of FTX customers who argue that it would cause them to miss out on the significant gains observed in the cryptocurrency market, particularly the yearlong Bitcoin rally and the resurgence of other tokens.