In a significant legal development, the U.S. Bankruptcy Court for the District of Delaware has granted FTX, a prominent cryptocurrency exchange, the green light to leverage its cryptocurrency holdings for the purpose of settling outstanding debts. The ruling, issued by Judge John Dorsey during a court hearing, marks a pivotal moment for FTX as it navigates its bankruptcy proceedings.
Judge Dorsey's decision comes after a thorough consideration of the motion submitted by FTX, in which the exchange sought approval to engage in various crypto-related activities, including selling, staking, and hedging assets. These holdings, valued at an impressive $3.4 billion, are now available to be utilized in the debt repayment process.
FTX initially submitted its request for permission to engage in these crypto-related activities back in August. The exchange argued that hedging its cryptocurrency assets would serve as a safeguard against potential downside risks before their sale. Furthermore, staking specific digital assets was deemed a strategic move to generate low-risk returns on otherwise idle digital assets, ultimately benefiting both the estates and creditors.
Questions arose during the hearing regarding the traceability of deposited assets. FTX's attorneys emphasized that the digital assets being sold were assets of the debtors and not tied to individual customers. This distinction was pivotal in gaining the court's approval.
In addition to the permission to leverage its cryptocurrency holdings, FTX also requested the hiring of Mike Novogratz from Galaxy Digital as an advisor. This move highlights the exchange's commitment to navigating its financial challenges effectively.
