Will FTX wallet transfer tens of millions of dollars in token sales begin?

The market has not yet gotten rid of the haze of ETF postponement, but FTX wallet has been making frequent moves recently. Is it adding insult to injury or is it just a false alarm?

Massive fund transfers related to FTX have been taking place, and the market has begun to worry that these tokens, and more tokens held by FTX, may be about to be sold off.

According to blockchain analytics platform Arkham Intelligence, since August 31, one FTX-related wallet has sent approximately $10 million in tokens to another FTX wallet via the Wormhole bridge, including $6.23 million in ETH and more than $4M Altcoins* ($1.2M FTT, $1.8M UNI**, **$1.3M HXRO, $550K SUSHI and $260K FRONT)*. It is unclear whether the transfers are related to the exchange’s bankruptcy proceedings or its recent request to hire Galaxy Digital to sell its cryptocurrency holdings in exchange for fiat currency.

In addition, on-chain data shows that on September 1, multiple FTX cold wallets began to transfer their SOL holdings. These wallets hold nearly 7 million SOL, equivalent to approximately US$134 million.

FTX seeks to sell assets

According to court documents filed by FTX on August 23, FTX wants to begin selling, staking and hedging a large number of its cryptocurrency assets. FTX hopes to return funds to creditors in the form of fiat currency rather than Bitcoin or Ethereum. In addition, FTX is worried that the one-time sale will cause the price to plummet, causing the value of its more than $3 billion in cryptocurrency holdings to be reduced. Therefore, it is proposed that the selling limit is 100 million US dollars of tokens per week, and the maximum limit is 200 million US dollars per week.

Additionally, FTX filed a request to hire Galaxy Digital CEO Mike Novogratz as an investment manager to oversee the management and sale of its recovered crypto assets. Under the proposed agreement, Galaxy would manage, trade and convert FTX’s assets into fiat currencies or stablecoins, and hedge the failed exchange’s exposure to volatile cryptocurrencies in exchange for monthly custody fees.

FTX believes that Galaxy has the ability to sell large amounts of cryptocurrency without affecting the market. Additionally, the exchange has filed a separate motion to develop guidelines for the management and sale of its digital assets and to establish hedging arrangements for eligible cryptocurrencies, primarily Bitcoin and Ethereum.

The exchange also requested permission to stake some idle crypto assets to generate passive income to increase distribution of funds to customers who are still awaiting refunds.

Although the claims made in the filing are not yet legally binding, the FTX token sale case is expected to be filed in Delaware Bankruptcy Court on September 13.

Restart FTX exchange

At present, FTX has submitted a restructuring plan, and the key information includes: all non-customer claims (such as the US Internal Revenue Service) will be included as secondary; FTT claims will be zero; offshore exchanges will restart to compensate for customer gaps, etc.

Previously, the current CEO of FTX had “began soliciting interested parties to restart the FTX.com exchange.” Nasdaq, Ripple Labs, Galaxy Digital, BlackRock, Tribe Capital, Robinhood, NYDIG, and OKCoin are interested in the FTX 2.0 reboot, according to a June 22 court filing in Delaware bankruptcy court.

FTX lawyers said the launch of the new exchange is expected to be completed sometime in the second quarter of 2024.

Slow progress faces criticism from creditors

FTX faces criticism from creditors over its slow progress in bankruptcy plan negotiations.

The exchange’s lawyer, Brian Glueckstein, rejected requests for expedited mediation at the latest bankruptcy hearing on August 23, saying the bankruptcy proceedings were expected to end in the second quarter of 2024.

This follows a draft plan presented by FTX on July 31, outlining its intention to repay customers through asset liquidations and lawsuits against insiders. However, FTX is committed to finding a buyer for the exchange FTX.com, and there is no news of bids from relevant institutions. The “delay” has undoubtedly exacerbated the tense relationship between FTX and its creditors.

In addition, it costs $50 million a month in legal fees and other costs, and every dollar spent on legal bills reduces the amount available to repay creditors.