FTX to Sell Digital Custody Unit for $500K, Down from $10M Buy

FTX, the crypto exchange that filed for bankruptcy in November 2022, will sell Digital Custody Inc (DCI), one of its subunits acquired in the past, for a fraction of the original purchase price. The sale of CoinList, a tokenized platform, is capped at $500k, unlike the $10 million on FTX paid for DCI during August 2022. This move is part of FTX`s ongoing initiatives to dispose of its assets and repay its creditors following the collapse of the crypto empire of Sam Bankman-Fried.

FTX’s Strategic Divestment

In order to prevent further losses and reduce operating costs, FTX agreed to sell DCI. The decision was made after determining that DCI’s integration into FTX’s operations, specifically for custodial services for FTX.US and LedgerX, was no longer a feasible option. The fall of FTX and the later sale of LedgerX turned DCI into an extra service not covered by the bankrupt program of the now-bankrupt FTX exchange. Still, DCI has much value, especially its segregated accounts license from South Dakota.

The sale by Circle to CoinList, led by DCI’s CEO Terrence Culver, is perceived as the fastest and the most effective way to get the offloaded unit off the shelf. Culver’s involvement is crucial, since his task was to ensure the re-licensing of DCI in South Dakota and underwrite the purchase through convertible notes. This structure highlights the strategic withdrawal of the exchange from a non-core asset, whereby the bank can reorganize its bankruptcy proceeding and the creditors’ repayment.

The Path to Recovery

A sequence of asset sales has been the eventual cause of FTX’s bankruptcy proceedings to restore the company’s financial stability and ensure creditors’ payback. Holding a sale hearing in the DCI auction was not opted for, and rather, higher bids within 3 days were accepted, which shows us that there is a practical approach to asset liquidation. This function gives FTX possible leeway in the sale process, ensuring a perfect fit with the company’s overall recovery pattern.

Additionally, the exchange’s plan of selling a stake in AI startup Anthropic, in which it and Alameda jointly invested $500 million in 2021, suggests a well-planned method to eliminate all unexpedential assets. These are crucial steps for FTX as it goes through a highly complex bankruptcy procedure that finally implies fulfilling its financial obligations toward creditors and other parties concerned under its collapse.

A huge price discount while selling DCI signifies FTX’s problems in its bankruptcy process. On the negative side, the loss on the sale is very large. Still, the strategic disposal of the non-core assets, including DCI, is necessary for FTX’s business operations to become leaner and enable FTX’s recovery path. FTX’s ability to attract featured CoinList users and utilize relationships with key figures, including Culver, illustrates the depth of its commitment to persevering in the face of financial adversity.

Read Also: Bitcoin ETF Debut Month Clocks Record Trading Volume