FTX To Sell Digital Custody for $500K
FTX to sell Digital Custody for $500K amid bankruptcy, reflecting asset devaluation and restructuring efforts.
FTX file motion to sell Digital Custody for $500k which FTX bought for $10m to Terrence Culver (person who sold DCI to FTX for $10m)
A&M (UCC/Ad hoc agrees) says this reflects a fair price for the valuable license from South Dakota that allows it to provide custody pic.twitter.com/QZ8XGVoHQ8
— Sunil (FTX Creditor Champion) (@sunil_trades) February 10, 2024
FTX has announced its intention to divest Digital Custody for $500,000. This decision comes as a part of FTX’s ongoing restructuring efforts under the leadership of CEO John Ray III. The move to sell Digital Custody at a significant discount marks a pivotal moment in FTX’s bankruptcy saga. Originally acquired for $10 million, the decision to sell reflects the diminished value of Digital Custody to FTX’s estate, particularly in light of FTX US’s operational hiatus.
Digital Custody, acquired with the aim of bolstering custodial services for FTX US and LedgerX, failed to fully merge into FTX’s ecosystem before the bankruptcy filing by former CEO Sam Bankman-Fried in November 2022. The acquisition, completed through two transactions totaling $10 million in December 2021 and August 2022, has not realized its potential within the FTX framework. The halt in operations of FTX US, combined with the sale of LedgerX, has rendered Digital Custody surplus to requirements, prompting FTX’s legal representatives to advocate for its sale.
CoinList, a platform known for token sales and cryptocurrency services, has emerged as the prospective buyer. The financing for this acquisition is notably provided by Terence Culver, Digital Custody’s original CEO and seller, indicating a return to foundational leadership for the custody service provider. Moreover, this arrangement shows a strategic partnership that aims to expedite regulatory approval processes, leveraging Culver’s established relationships and expertise.
Restructuring Efforts
The sale of Digital Custody, despite its reduced valuation, is a calculated step in FTX’s complex restructuring plan. It underscores the company’s focus on liquidating non-essential assets to facilitate customer repayments and streamline operations. The custodial license held by Digital Custody from the South Dakota Division of Banking remains a valuable asset, attracting three competitive offers. The selection process prioritized swift transaction completion and the potential for regulatory endorsements, with Culver’s offer meeting these criteria.
FTX reiterated its commitment to repay customers, with no plans to relaunch the cryptocurrency exchange. This stance was confirmed during a January 31 court hearing, emphasizing the restructuring plan’s focus on financial restitution over operational revival. Additionally, FTX’s approach to customer cryptocurrency deposits has sparked debate, with users seeking valuation adjustments to capitalize on recent market surges.
The transaction for Digital Custody includes provisions for FTX to entertain superior offers, ensuring the best possible outcome for the estate. Lastly, a reverse termination fee has been set to safeguard the sale’s completion, demonstrating FTX’s cautious yet determined approach to navigating its bankruptcy proceedings.
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Filed under: Bitcoin - @ February 13, 2024 3:26 pm