FTX plans sale of Digital Custody for $500K in bankruptcy move

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FTX’s legal team clarified that since FTX US hasn’t been restarted, Digital Custody holds little value for the estate, hence the sale.

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FTX plans sale of Digital Custody for $500K in bankruptcy move

The FTX debtors estate, led by CEO John Ray III, has filed to sell Digital Custody to CoinList for a significant markdown of $500,000, with financing provided by DC’s original CEO and seller, Terence Culver. FTX initially purchased Digital Custody for $10 million.

According to FTX’s legal filing, DC was acquired to offer custodial services for FTX US and LedgerX. However, DC was not fully integrated into the FTX ecosystem before former CEO Sam Bankman-Fried filed for bankruptcy in November 2022, three months after acquiring DC. FTX purchased the company in two $5 million transactions in December 2021 and August 2022.

FTX file motion to sell Digital Custody for $500k which FTX bought for $10m to Terrence Culver (person who sold DCI to FTX for $10m)

A&M (UCC/Ad hoc agrees) says this reflects a fair price for the valuable license from South Dakota that allows it to provide custody pic.twitter.com/QZ8XGVoHQ8

— Sunil (FTX Creditor Champion) (@sunil_trades) February 10, 2024

FTX’s legal team also clarified that since FTX US hasn’t been restarted, Digital Custody holds little value for the estate. It states, “DCI is 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 U.S..”

However, DC still holds a custodial license from the South Dakota Division of Banking. After evaluating three offers, including one from Culver, the debtors selected the better offer, the capability to complete the sale quickly and a beneficial relationship with Culver, which is believed to facilitate regulatory approval swiftly.

Related: Sam Bankman-Fried to return to court for hearing over legal representation

FTX’s legal team mentioned that both the committee and the ad hoc committee of non-U.S. customers of FTX.com approved the transaction. However, as part of the agreement, FTX can seek a superior offer for DC until three days before the closing. If the buyer fails to complete the deal, a reverse termination fee of $50,000 will be imposed.

The defunct cryptocurrency exchange FTX has clarified that its restructuring plans do not include a reboot of the firm but focus on repaying customers in full. In a Jan. 31 court hearing, FTX lawyer Andy Dietderich emphasized that despite extensive efforts, there is no plan to relaunch FTX.

Prior to this, numerous FTX users asked a U.S. bankruptcy judge to prevent the collapsed crypto exchange from assessing their cryptocurrency deposits using 2022 prices. They claimed this approach prevented them from benefiting from the recent surge in crypto prices.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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