FTX Liquidates $10M Subsidiary for $500K to Pay Back Debts

With no plans to revive FTX.US, the estate lawyers detailed the subsidiary held minimal value as an asset.

FTX garage sale in the middle of the desert with SBF's hair rolling in the sand like tumbleweed.
Created by Kornelija Poderskytė from DailyCoin
  • FTX remains committed to generating funds to pay back debts. 
  • The debtor’s estate has filed to sell its $10M subsidiary at a significant discount. 
  • The decision follows FTX’s abandonment of plans to restart its defunct exchange. 

FTX, under the leadership of CEO John Ray III, is on a relentless mission to generate liquidity for repaying debtors amidst mounting pressures from regulators and creditors. From scouring past deals for scraps to leveraging Bitcoin shorts, the defunct exchange’s estate leaves no stone unturned in its commitment to reimburse customers, even if it means offloading assets at discounted rates.

FTX Moves to Sell DCI 

The FTX Debtors estate has filed to sell Digital Custody Inc. (DCI), a subsidiary acquired for $10 million between 2021 and 2022, now being sold to CoinList at a significant discount of 95%, totaling just $500,000, with financing for the sale provided by DCI’s original CEO and seller, Terence J. Culver.

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According to the filing, FTX lawyers detailed that DCI intended to provide custodial services for FTX.US and LedgerX. However, it was never fully integrated into the exchange’s operations before SBF filed for bankruptcy in November 2022.

FTX DCI sell motion document.
Snippet from the sale motion

Now that there are no plans to revive FTX.US, the estate lawyers detailed that DCI held minimal value as an asset, prompting the decision to offload it. FTX lawyers wrote:

 "DCI is also no longer useful to the Debtors’ business given the Debtors’ sale of LedgerX and that it is unlikely for the Debtors to sell or restart FTX US."

FTX received three offers for DCI, including from its former CEO, Culver. The debtors’ estate chose the purchases based on their ability to expedite the transition. While relevant committees have approved the sale, the debtors’ estate has a brief window to seek alternative offers before finalizing the deal, with a reverse termination fee of $50,000 if the transaction falls through.

FTX Revival Off the Table

After over a year of concerted efforts to revive the exchange, FTX recently abandoned all plans, shifting its focus to fully reimbursing its customers. The decision follows unsuccessful negotiations with potential bidders and investors, per attorney Andy Dietderich, who cited a lack of commitment from interested parties to provide the necessary capital for the exchange’s reconstruction.

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Dietderich further outlined that customers will be paid in full, with the reimbursement calculations pegged to prices from November 2022, when SBF filed for bankruptcy. According to CoinMarketCap, Bitcoin traded for $16,700 then. At press time, Bitcoin hovered around $48,000. 

On the Flipside

  • FTX debtors estimate that customers would receive over 90% of distributable value worldwide if the Bankruptcy Court approves the amendment plan by the end of 2024 Q2.
  • FTX filed to sell its $1 billion stake in AI startup Anthropic. 
  • FTX recently proposed an unconventional plan to repay its customers – shorting Bitcoin with leverage.

Why This Matters

FTX remains steadfast in its commitment to reimburse its customers, pushing forward despite the sale’s limited impact on liquidity. This development also marks a significant milestone for DCI, paving the way for its resurgence under fresh leadership.

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This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

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Insha Zia

Insha Zia is a senior journalist at DailyCoin covering crypto developments, especially in the Cardano ecosystem. With a Bachelor of Science in Computer Systems Engineering, he delivers high-quality articles with his technical background and expertise in data analysis and programming languages, aiming to educate and inform readers accurately, transparently, and engagingly. Insha believes education can drive mass adoption of the crypto space, and he is committed to giving DailyCoin readers a better understanding of the technology.