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FTX Receives Court Approval to Sell Crypto to Repay Customers

FTX has been granted court approval to sell its cryptocurrency assets to repay customers in U.S. dollars.

The decision, made Wednesday (Sept. 13) by U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, aims to minimize risks associated with price volatility in the crypto markets, Reuters reported Wednesday.

Under the approved plan, the bankrupt crypto exchange will be permitted to sell up to $100 million in cryptocurrency per week, according to the report. Additionally, the exchange can enter into hedging and staking agreements to reduce the risk of price volatility and earn passive income on more mainstream crypto assets such as bitcoin and ether.

The request was made by FTX and received support from the official committee representing FTX’s customers in the bankruptcy, as well as an ad hoc committee representing non-U.S. customers with deposits on FTX.com’s international exchange, the report said. 

During the court hearing, concerns were raised by two FTX customers regarding the potential impact of the sales on crypto prices, per the report. They also questioned whether FTX owned all the crypto it held in its accounts. However, Dorsey overruled these concerns.

Acknowledging the risk of its liquidation efforts affecting the crypto markets, FTX disclosed that it had enlisted the services of U.S. crypto firm Galaxy as an investment advisor, according to the report. Galaxy will help manage the risk of “information leakage” leading to short-selling activity and sharp declines in crypto prices. 

FTX emphasized the risks associated with holding its current crypto portfolio, as certain assets could become locked in as their prices decline, the report said.

In a further development, Dorsey has allowed FTX to increase its liquidation pace to up to $200 million per week, subject to agreement from both creditors committees, per the report. FTX has revealed that it owns $3.4 billion in cryptocurrencies, including significant holdings in Solana, bitcoin and ether.

This decision comes two days after it was reported that FTX is set for a potential revival, with the defunct crypto exchange‘s estate having reached out to over 75 potential bidders since May and having received several bids.

The bids are undergoing due diligence and information sharing, and the deadline for new bids is Sept. 24.