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(Kitco News) -
Delaware Bankruptcy Court Judge John Dorsey, who is overseeing the Chapter 11 proceedings of FTX, has granted the crypto exchange’s request to sell off some key assets.
According to a court filing dated Jan. 12, Dorsey approved the request to auction off four of the solvent companies in the FTX group by the end of March 2023: FTX Europe, FTX Japan, Embed Technologies, and LedgerX.
Lawyers for the bankrupt crypto exchange filed the request on Dec. 15, claiming there’s a strong market for the subsidiaries, but the potential loss of licenses and employees could destroy much of their value if they wait much longer.
FTX Europe AG ran FTX’s European digital assets and derivatives business, but not the crypto exchange itself. FTX Europe also has Cyprus and UAE subsidiaries with suspended licenses which could be reinstated if they were acquired by new owners.
FTX Japan Holdings K.K. operated as a registered cryptocurrency exchange under Japan’s Financial Services Agency (FSA). It was known as Liquid Group Inc. before being acquired by FTX in April 2022 and also has a subsidiary, Quoine Pte Ltd., which operates a cryptocurrency exchange in Singapore.
Embed Financial Technologies Inc. is a Delaware-based corporation which includes its subsidiary Embed Clearing LLC. Embed Clearing is registered with the U.S. Securities and Exchange Commission (SEC) as a clearing broker-dealer and is a member of the Financial Industry Regulatory Authority (FINRA), the Nasdaq, Investors Exchange LLC, The Depository Trust Company, the National Securities Clearing Corporation, and the Options Clearing Corporation.
LedgerX LLC is a Delaware-based digital currency futures and options exchange and clearinghouse registered with the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM), Derivatives Clearing Organization (DCO) and Swap Execution Facility (SEF).
Because FTX Japan and FTX Europe were registered in jurisdictions with more regulatory oversight and explicit reserve requirements, they are not themselves insolvent, and their licenses and technology could make them profitable under new ownership. Similarly, LedgerX and Embed operated under the regulatory regimes of U.S. agencies, so their licenses and technology would be valuable to other financial firms.
When FTX filed the request, they wrote that “the longer operations are suspended, the greater the risk to the value of the assets and the risk of a permanent revocation of licenses.” They have also experienced “significant customer and employee attrition pressures” which will continue as long as they are held by FTX in bankruptcy, which would destroy the companies’ value.
FTX also said that because all four businesses were acquired fairly recently, they “operated on a generally independent basis from the Debtors’ other operations, holdings and investments” and also maintained segregated customer accounts as well as separate management structures and IT systems. “The relative independence of each of the Businesses’ operations from the remainder of the Debtors’ core business operations make a potential sale process for each of the Businesses relatively less complex,” they wrote.
FTX has proposed an auction with initial bids due before 5 PM EST on Jan. 18 for Embed, Jan. 25 for LedgerX, and Feb. 1 for both FTX Europe and FTX Japan. FTX hopes to complete the sales for the four businesses between Feb. 27 and Mar. 27, 2023.
