FTX, a leading cryptocurrency exchange, has requested the court’s permission to sell up to $200 million worth of cryptocurrencies weekly, as well as restart its BTC hedging activities. This move is aimed at managing the market risks and ensuring the exchange’s stability amidst the volatile crypto market.
FTX Seeks Approval to Hire Galaxy Digital Capital Management as Investment Manager
Galaxy Investment Manager for FTX
FTX, a bankruptcy debtor, has filed a motion in bankruptcy court to hire Galaxy Digital Capital Management LP as its investment manager. The motion was uploaded to FTX’s claims agent website on Aug. 23.
Under the proposed agreement, Galaxy will provide investment management services for FTX’s digital assets. This includes managing and trading the assets to convert them into fiat currency or stablecoins. Additionally, Galaxy will hedge FTX’s exposure to volatile cryptocurrencies like Bitcoin and Ether.
In exchange, Galaxy will receive a monthly management fee consisting of a hedging fee based on the average net asset value of the assets being hedged and a liquidation fee based on the total proceeds from liquidated assets.
FTX believes that hiring an experienced external investment manager like Galaxy is advantageous due to Galaxy’s expertise in selling significant cryptocurrency positions without negatively impacting the market. Galaxy can also execute trades confidentially to avoid signaling FTX’s intentions and moving prices unintentionally.
If approved, Galaxy will owe FTX a fiduciary duty to act in its best interest when managing the digital assets. FTX’s filing describes Galaxy’s policies and procedures for avoiding conflicts of interest in fulfilling this obligation.
FTX argues that hiring Galaxy as proposed is a proper exercise of its business judgment and seeks court approval under Section 363(b) of the Bankruptcy Code. This provision allows a debtor to use estate property outside of the ordinary course of business after notice and a hearing.
The goal of this proposed engagement is to aid FTX’s restructuring efforts by monetizing its substantial cryptocurrency holdings.
FTX Requests Permission for Property Sale
FTX debtors have filed another motion on Aug. 23, seeking court approval to establish guidelines for managing and selling their digital asset holdings. This motion is likely related to the hiring of Galaxy as the investment manager.
According to the court documents, FTX seeks authorization to retain an investment adviser to assist with selling certain coins and tokens over time. The proposed guidelines would allow FTX to sell up to $100 million worth of digital assets per week, with the ability to temporarily increase the limit to $200 million.
FTX argues that selling digital assets through an experienced investment manager will help maximize sale proceeds while reducing volatility exposure. The filing also requests court approval for FTX to enter hedging arrangements on eligible cryptocurrencies like Bitcoin and Ethereum.
Additionally, FTX seeks permission to stake some idle crypto assets to generate passive yield. The debtors believe that these measures represent a sound exercise of business judgment that will benefit creditors by mitigating market risk.
However, FTX’s digital asset sale guidelines and requested authority are subject to bankruptcy court approval after notice and a hearing.