Galaxy Digital, helmed by Mike Novogratz, appears poised to oversee the remaining cryptocurrency assets from the defunct FTX cryptocurrency exchange.
On August 24, Galaxy Digital submitted a motion to the US District Court for the District of Delaware, seeking approval for protocols governing the sale of digital assets recuperated during the ongoing bankruptcy proceedings.
The filing details FTX’s intentions to transfer approximately $7 billion worth of recovered cryptocurrency tokens to Galaxy Digital’s management, subsequent to FTX’s collapse in 2022.
FTX aims to arrange for the potential sale of its cryptocurrency reserves and stake tokens through Galaxy Digital, as outlined in its preliminary proposal.
This approach is underpinned by a comprehensive strategy to manage and monetize the cryptocurrency assets, intended to mitigate volatility exposure and potential fiat repayments to creditors.
FTX plans to retain Galaxy Digital’s services as a registered investment adviser, leveraging the firm’s specialized expertise in digital asset markets to optimize the valuation of its token portfolio.
The partnership offers several advantages, including the ability to anonymously offload holdings in the markets and reduce susceptibility to market manipulation.
Moreover, FTX envisions Galaxy Digital playing a critical role in assessing timing, trading platforms, and counterparties for prospective transactions.
The investment guidelines established will lead Galaxy Digital to sell various digital assets owned by FTX, while also managing Bitcoin (BTC) and Ether hedging prior to potential sales.
FTX’s strategy encompasses liquidating crypto holdings for fiat currency to minimize exposure to market volatility.
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Concurrently, leveraging liquid hedging markets for Bitcoin and Ether aims to mitigate the impact of unexpected price fluctuations before the assets are sold.
The filing also highlights FTX’s interest in Decentralized Finance (DeFi).
It plans to stake specific cryptocurrencies to generate passive income under Galaxy Digital’s guidance, stating that this approach will yield low-risk returns on dormant digital assets, ultimately benefiting the estate and creditors.
As the bankruptcy proceedings continue, FTX has recently proposed a restructuring plan that contemplates the establishment of a rejuvenated offshore exchange.
This initiative could provide creditors with the choice of reclaiming a portion of their lost funds or participating in equity, tokens, and other stakes within the rebooted FTX framework.
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