FTX boosts cash reserves to $4.4 billion for creditor repayment

abdelaziz Fathi

The now-defunct cryptocurrency exchange FTX has been actively selling its crypto holdings to increase its liquid assets as it prepares for the planned repayment to creditors.

According to a Bloomberg report, as of December 2023, FTX liquidators nearly doubled the company’s cash reserves to $4.4 billion, up from $2.3 billion in October.

The sale of crypto assets from the FTX group’s four major affiliates led to a rise in cash reserves. These affiliates include FTX Trading, Alameda Research, West Realm Shires Inc, and Clifton Bay Investments. West Realm Shires Inc is the parent company of FTX’s U.S. operations (FTX.US), while Clifton Bay Investments is associated with the venture capital arm FTX Ventures.

Since receiving the green light to sell its crypto holdings in September, FTX has been actively transferring funds to other exchanges and has unstaked large amounts of cryptocurrency from staking platforms.

Earlier in January, the FTX estate reportedly caused nearly $1 billion in outflows from the Grayscale Bitcoin Trust (GBTC) in the first five days of its trading as an ETF. At the same time, the exchange’s trading unit Alameda Research voluntarily dropped a lawsuit against Grayscale, the issuer of GBTC. This lawsuit, filed before the conversion of GBTC into an ETF, alleged an “improper redemption ban” on the fund’s shares.”

The market’s response to FTX creditor claims has been somewhat optimistic, with some claims trading as high as $0.50 on the dollar in October 2023. This suggests a reasonable chance for creditors to recover their funds. While there is no definitive timeline for FTX customer reimbursements, current plans estimate that repayments should start sometime in 2024.

While FTX’s move to liquidate assets and raise funds to repay its creditors, there’s ongoing debate among customers over the valuation of their claims. Several clients of the now-defunct cryptocurrency exchange are disputing the method the company plans to use for valuing their deposits in the ongoing bankruptcy proceedings.

FTX’s bankruptcy plan involves reimbursing customers in U.S. dollars based on the crypto prices at the time of its bankruptcy filing in November 2022. Customers argue that this method undervalues their assets due to the recent market recovery.

Currently, the value of customer funds is tied to the prices at the time FTX filed for Chapter 11 Bankruptcy. Since then, the price of Bitcoin has surged by 150%, currently trading at around $42,200.

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