Bankrupt cryptocurrency exchange FTX gains court authorization for asset disposal

A U.S. court has granted approval to bankrupt cryptocurrency exchange FTX to liquidate its crypto assets, enabling the repayment of customers in U.S. dollars while mitigating the risks associated with crypto market volatility.

U.S. Bankruptcy Judge John Dorsey gave the green light to FTX's proposal during a hearing in Wilmington, Delaware. The approval allows FTX to sell up to $100 million in cryptocurrency weekly and engage in hedging and staking agreements to manage price volatility risk and generate passive income from mainstream cryptocurrencies like bitcoin and ether. FTX's request had support from the official committee representing its customers in bankruptcy, as well as an ad hoc committee representing non-U.S. customers with deposits on FTX.com's international exchange.

During the hearing, concerns raised by two FTX customers regarding potential market crashes and doubts about FTX's crypto ownership were overruled by Dorsey. FTX acknowledged the risk of its asset liquidation affecting crypto markets and had employed U.S. crypto firm Galaxy as an investment advisor to manage the risk of information leakage leading to short-selling and sharp price declines. However, maintaining the current crypto portfolio also posed risks, potentially locking FTX into holding declining assets, as per court documents.

Dorsey also granted FTX the flexibility to increase its weekly liquidation limit to $200 million if both creditors committees agreed. FTX stated it possessed $3.4 billion in cryptocurrencies, including $1.16 billion in Solana, $560 million in bitcoin, and $192 million in ether.