FTX Debtors to Sell Digital Custody Inc. for a Major Markdown amidst Financial Troubles
Summary:
FTX Debtors, currently facing financial trials, plans to sell its asset, Digital Custody Inc. (DCI), to CoinList for $500,000, a notable markdown from its $10 million buying price. Financed by DCI's original CEO, Terence J. Culver, the sale is due to DCI's unsuccessful integration into the FTX ecosystem. Before the closure of the deal, FTX retains the right to accept a higher bid. Moreover, FTX's restructuring plans, focused on repaying their customers in full, show no signs of the firm's revival, as confirmed by their lawyer in a recent court hearing.
Headed by Chief Executive Officer John Ray III, the financially troubled entity FTX Debtors has made a move to liquidate another of its holdings, Digital Custody Inc. (DCI). Acquired for a sum of $10 million, they intend to sell it to CoinList for a marked-down sum of $500,000, a deal funded by DCI's original CEO Terence J. Culver, who was also the previous proprietor. As per legal documentation filed by FTX, the initial purchase of DCI aimed to provide custodial services to FTX U.S. and LedgerX. Unfortunately, DCI never fully integrated into the FTX structure due to ex-CEO Sam Bankman-Fried declaring bankruptcy in November 2022, a mere quarter of a year after the purchase of DCI. FTX bought the DCI as a branch in two separate transactions of $5 million each in December 2021 and August 2022.
FTX's legal representation stressed that given the fact that FTX U.S. did not restart, the worth of Digital Custody Inc. to the company's estate is minimal. The official statement highlighted that DCI is no longer of any utility to the debtor's business, due to the sale of LedgerX and the improbability of a sale or reboot of FTX U.S. Despite this, DCI still possesses a custodial license granted by the South Dakota Division of Banking. Taking into consideration three proposals, including one from previous owner Culver, the Debtors selected the buyer, factoring the better offer, the ability to close the sale expediently, and a beneficial relationship with Mr. Culver, which they anticipate will ensure rapid regulatory approval.
The transfer of ownership is approved by both the Committee and the Ad Hoc Committee of Non-US Customers of FTX.com. However, according to the deal, FTX reserves the right to entertain a more lucrative proposal for DCI up until three days prior to the finalization of the sale. If, for any reason, the buyer defaults on the transaction, a reverse termination penalty of $50,000 will be enforced.
The bankrupt cryptocurrency exchange FTX made a public statement emphasizing that their restructuring plans did not involve reviving the company, but focused primarily on repaying their customers in full. Andy Dietderich, the lawyer representing FTX, made it clear during a January 31 court hearing that despite concerted efforts, there are no plans to resurrect FTX under the current Chapter 11 bankruptcy scheme.
In earlier developments, several FTX customers had petitioned a U.S. bankruptcy judge to prevent the defunct crypto exchange from determining the value of their cryptocurrency deposits based on 2022 figures, alleging that this method barred them from profit earned due to the recent upsurge in crypto market prices.
Published At
2/11/2024 12:06:52 PM
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