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In a notable development within the cryptocurrency sector, the FTX Debtors estate has initiated a significant asset liquidation move. This involves selling Digital Custody Inc. (DCI), a subsidiary previously acquired for $10 million, to CoinList for a fraction of the price, at $500,000. This decision is a part of the broader efforts by the company’s estate to navigate through its bankruptcy proceedings.
Digital Custody Inc. was acquired by FTX through two transactions in December 2021 and August 2022, amounting to a total investment of $10 million. The acquisition aimed to bolster custodial services for FTX.US and LedgerX. However, the integration of DCI into the crypto exchange’s ecosystem was halted, particularly after the bankruptcy filing by the company’s former CEO, Sam Bankman-Fried, in November 2022.
(1/4) The Debtors’ 10/17 press release stated that customers will receive over 90% of distributable value, but the eventual amount of that distributable value is presently unknown at this time. — FTX (@FTX_Official) October 18, 2023
Financing the Sale
The sale to CoinList is notably being financed by DCI’s original CEO, Terence J. Culver. The decision to accept CoinList’s offer was influenced by several factors, including the speed of transaction execution and Culver’s relationship with the purchasing entity, which is anticipated to aid in obtaining regulatory approvals swiftly.
Despite DCI’s initial high purchase price, its value to the crypto exchange’s estate diminished significantly, especially after the decision to sell LedgerX and the unlikely prospect of restarting FTX US. Nonetheless, DCI holds a valuable license from the South Dakota Division of Banking for custodial services, which remains a critical asset.
FTX Approval and Conditions
The transaction has garnered approval from relevant committees within the company’s restructuring framework. The company retains the option to seek better offers for DCI until three days before the final motion hearing, with a stipulated reverse-termination fee if the deal does not close.
This sale underscores the volatile nature of the cryptocurrency market and the complexities surrounding asset liquidation and regulatory compliance. It reflects the strategic decisions companies must make when navigating financial difficulties, especially in the fast-evolving crypto space.
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