Since FTX was taken over by the bankruptcy liquidation team this year, FTX has been taking a series of measures to deal with its bankruptcy reorganization process, including selling assets and formulating a reorganization plan, aimed at recovering as much funds as possible for creditors and stabilizing its business operations.
In one week, FTX exchange has made two important developments in its complex bankruptcy process.
On December 7, local time in the United States, the FTX Unsecured Creditors Official Committee disclosed a reply letter sent to the FTX 2.0 Customer Ad Hoc Committee on December 4. The official committee pointed out in the letter that the current proposed restructuring plan strikes an appropriate balance in balancing the competing interests of stakeholders and safeguarding the interests of all unsecured creditors. It is expected that the revised restructuring plan and disclosure statement will be submitted to the bankruptcy court in mid-December to provide more details.
At the same time, the Official Committee is also evaluating reasonable alternatives that may improve the terms of the plan and is in discussions about potential acquisitions, capital reorganizations, or other transactions. Although the Official Committee is currently restricted by confidentiality obligations and cannot disclose details, many concepts, including equity tokens involving debt recovery, have been considered. The Official Committee also expressed its welcome to continue to work with the FTX 2.0 Customer Ad Hoc Committee in the coming months to work together to complete these bankruptcy cases.
On the other hand, on November 30, FTX also received approval from the bankruptcy court to start selling its shares in the digital trust managed by Grayscale. This is part of FTX's plan to raise funds to repay billions of dollars in debt. According to court documents, FTX plans to sell these assets in a way that maximizes value while trying to avoid disrupting the digital investment market.
FTX’s investment in Grayscale covers a variety of digital currencies, and its buyers do not directly hold the actual currency, but instead receive shares in a trust formed and managed by Grayscale. According to FTX’s statement in court documents, its trust shares were valued at approximately $744 million last month.
So how did FTX deal with this asset? What steps are needed to transform Grayscale's shares into creditors' rights? In other words, how did FTX realize its assets and repay its debts? Odaily Planet Daily found the detailed steps in the court documents.
Steps in court document discovery
According to court documents filed, FTX Trading Ltd. and its related debtors and debt holders are implementing a series of procedures to sell or transfer the trust assets they hold. The goal of these procedures is to maximize the value of the assets while maintaining efficient management of the trust assets and distribute the proceeds to creditors in a fair and appropriate manner.
The debtor is authorized, but not directed, to conduct the sale of the trust assets in accordance with the following sales procedures, according to the court document:
Selection of Investment Advisor: FTX will market and sell the trust assets through a court-approved investment advisor. This means that FTX will enter into an investment services agreement with the advisor, who will be responsible for handling all matters related to the sale of the trust assets.
Establishment of a Pricing Committee: FTX will establish a pricing committee consisting of its representatives, committee representatives, and ad hoc committee representatives. This committee is responsible for coordinating with investment advisors to review and decide on the pricing and sales strategies of assets.
Pricing Restrictions: The sale of certain trust assets will be subject to pricing and sales restrictions. These restrictions will be specified in the Investment Services Agreement and agreed upon in advance in writing with FTX, the Investment Advisor, the Committee, and the Ad Hoc Committee. In other words, this ensures that assets are not arbitrarily priced, thereby avoiding the problem of a large difference between market value and pricing value.
Sales Method: FTX will sell the Trust Assets through an investment advisor, over-the-counter (OTC) or through an exchange.
Reporting requirements: All sales of Trust assets will be recorded and included in monthly reports submitted to FTX, the Commission, and the Ad Hoc Committee.
Prohibition on Related Party Transactions: The investment adviser may not select any of its related parties as a counterparty to transactions in trust assets.
Bid Requirements: For over-the-counter sales, the investment adviser is required to obtain at least two quotes from different counterparties before executing any such sales.
Sale Execution: FTX may sell Trust Assets through an Investment Advisor to one or more Buyers in one or more transactions.
Execution of Broker Transactions: All sales of Trust assets shall be made through or with a registered securities broker-dealer or other person exempt from registration.
Who might the interested parties be?
According to a report by Coindesk in August this year, this "investment advisor", that is, the role played by investment banks in traditional finance, may be Galaxy in this incident.
“Galaxy Asset Management has extensive experience in digital asset management and trading, including experience relevant to the types of transactions and investment objectives proposed,” according to an August court filing, referring to Galaxy Asset Management, the asset management firm founded by Mike Novogratz and approved by the U.S. Securities and Exchange Commission.
Galaxy Digital, another part of the company that is more well-known, announced that it was implicated by FTX for tens of millions of dollars when FTX went bankrupt, and the documents detailed the conflict of interest procedures that will ensure that the asset manager acts in the best interests of FTX. If Galaxy is indeed the investment advisor for the Grayscale asset sale, then according to the above step terms, Galaxy Digital cannot participate in the sale of Grayscale assets as a counterparty.
Some new developments reveal more details about its asset sales process. For example, it was reported that "FTX/Alameda related addresses transferred $2.8 million GMT to Wintermute" and "FTX/Alameda addresses transferred 17,100 SOL to Wintermute." These transactions suggest that market makers like Wintermute may have played the role of counterparties or broker-dealers in FTX's asset sales process.
It can be seen that the sales steps given in the document are still very professional. The setting of investment advisors and non-mandatory guidance allows them to make decisions that are most beneficial to creditors based on market conditions and the characteristics of the assets. This approach speeds up the decision-making process and improves the efficiency of sales, while also ensuring the transparency and traceability of the process.
However, it also raises risk management challenges: conflicts of interest may exist, and additional oversight and control mechanisms are needed to ensure that the decisions of the several committees are in the best interests of creditors and other stakeholders.
Overall, while this approach provides flexibility and efficiency, it also requires appropriate supervision and transparency mechanisms to maintain the fairness and efficiency of the entire sales process. #ftx #SOLPriceAnalysis
