Mike Novogratz’s digital asset management firm, Galaxy Digital, has been chosen to manage the remaining cryptocurrency holdings of bankrupt cryptocurrency exchange FTX. The decision was made after Galaxy Digital filed a motion with the United States District Court for the District of Delaware, seeking authorization and approval for the sale of digital assets recovered during the ongoing bankruptcy proceedings of FTX.
According to the filing, FTX plans to transfer approximately $7 billion worth of recovered cryptocurrency tokens to Galaxy Digital for management. FTX aims to provision for the potential sale of its cryptocurrency holdings and stake tokens through Galaxy Digital, as outlined in its preliminary statement. The company’s goal is to reduce exposure to volatility and potential fiat repayments to creditors by implementing a comprehensive management and monetization plan for its cryptocurrency holdings.
In retaining Galaxy Digital as a registered investment adviser, FTX expects to benefit from the firm’s specialized knowledge of digital asset markets. Galaxy Digital’s expertise will play a crucial role in assessing the timing, trading venues, and counterparties of potential transactions. Additionally, FTX anticipates that the partnership with Galaxy Digital will allow for anonymous sales of holdings into the markets, mitigating the risk of market manipulation.
Under the general investment guidelines, Galaxy Digital will be responsible for selling various FTX-owned digital assets in the future. They will also hedge Bitcoin (BTC) and Ether (ETH) before any potential sales. FTX’s strategy involves selling its crypto holdings for fiat to reduce exposure to market volatility. Meanwhile, it will leverage liquid hedging markets for Bitcoin and Ether to minimize exposure to unexpected price fluctuations before selling them.
The filing also acknowledges the potential of Decentralized Finance (DeFi) by noting that FTX intends to stake certain cryptocurrencies to generate passive yield income. Staking these digital assets is expected to generate low-risk returns on otherwise idle digital assets, benefiting the estate and, ultimately, the creditors.
In recent news, FTX has proposed a restructuring plan that could lead to the creation of a rebooted offshore exchange. Creditors may be given the option to recover a portion of their lost funds or opt for a share of equity, tokens, and other interests in the new FTX entity.
The partnership between FTX and Galaxy Digital marks a significant step in managing the remaining cryptocurrency assets of the bankrupt exchange. FTX’s decision to entrust Galaxy Digital with this responsibility demonstrates confidence in the firm’s expertise and track record in the digital asset management space. As bankruptcy proceedings continue, the collaboration between the two firms will play a crucial role in maximizing the value of FTX’s token portfolio and ensuring the fair treatment of creditors.
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