U.S. Justice Department Opposes FTX’s $3 Billion Crypto Asset Sale Motion

From the Digifinex blog.

According to a report by Unchained, the U.S. Department of Justice (DOJ) has expressed opposition against FTX’s motion to sell its crypto assets valued over $3 billion amid its bankruptcy proceedings.

FTX’s Proposal

On August 23, FTX’s restructuring team submitted a motion to the court. They proposed to refund creditors in U.S. dollars and have planned to hedge against BTC and ETH to circumvent volatility and risks of depreciation. The goal is to maximize value during the liquidation of the $3 billion in crypto assets.

(Image via CryptoSlate

The Opposition

The U.S. Trustee, a DOJ office representing the government in bankruptcy proceedings, expressed concerns in its September 7 court filing. It critiqued the manner in which FTX set its management and monetization guidelines. Specifically, the U.S. Trustee flagged FTX’s failure to notify several parties outside the committees representing unsecured creditors and non-U.S. creditors about any changes in the amounts or types of cryptocurrencies up for sale.

Andrew Vara, representing the case, stated: “If the debtor has a valid business reason for not wishing to disclose such information, the debtor should disclose that reason. But at the very least, the U.S. Trustee should be included in the list of those receiving such change notices.”

(Image via Associated Press)

The Violation

The U.S. Trustee asserted that FTX breached Rule 4001-2, which pertains to the disclosures required in any motion for financing, including the amount of cash collateral needed and the pricing and economic terms. FTX’s motion proposes selling up to $100 million of digital assets weekly, with an occasional spike to $200 million upon approval. They intend to adopt diverse strategies to mitigate any adverse market price effects of their liquidated crypto assets.

However, Vara mentioned: “The debtor hasn’t proven its necessity to fulfill the obligations of the Superpriority Administrative Expense Claim. Their motion should be denied, providing stakeholders an opportunity to oppose before any submission or disclosure.”

Upcoming Hearing

A hearing regarding FTX’s motion is slated for September 13.

Keywords: FTX, U.S. Department of Justice, Crypto Asset Sale, Bankruptcy, Unchained, BTC, ETH, U.S. Trustee, Andrew Vara, Superpriority Administrative Expense Claim, Rule 4001-2

This article came directly from the Digifinex blog, found on https://blog.digifinex.com/2023/09/11/u-s-justice-department-opposes-ftxs-3-billion-crypto-asset-sale-motion/

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