FTX’s Digital Custody Sold for a Steal: CoinList Snags Bargain in Bankruptcy Fire Sale

Key Takeaways

• FTX seeks to sell Digital Custody Inc. (DCI) to Coinlist for a significantly lower price than its original purchase price.
• DCI never became operational within FTX US or Ledgerx before the bankruptcy filing.
• The proposed sale showcases FTX’s effort to optimize its financial estate and increase the recovery for creditors and stakeholders.

FTX Trading Ltd. and its affiliates have outlined a strategy to sell an acquired subsidiary, originally purchased for $10 million, to Coinlist for $500,000.

This proposal, documented in court filings on February 9, 2024, with the United States Bankruptcy Court for the District of Delaware, aims to optimize the financial returns for creditors and stakeholders within the framework of FTX’s ongoing bankruptcy process.

Subsidiary Sale to Coinlist for $500K Amid Bankruptcy Proceedings

Under the leadership of new CEO and Chief Restructuring Officer John Ray III, FTX, the cryptocurrency exchange now navigating bankruptcy, is looking to divest a previously acquired subsidiary for a fraction of its purchase price.

The entity in question, Digital Custody Inc. (DCI), was acquired for $10 million but is now on the sales block to Amalgamated Token Services Inc., operating as Coinlist, for $500,000. The funding for the purchase was secured by DCI’s original CEO and seller, Terence Culver.

DCI Holds Minimal Value

The legal representatives of the company outlined that Digital Custody Inc. (DCI) holds minimal value for the bankruptcy estate, attributing this to the sale of LedgerX and the improbability of relaunching or selling FTX US. “Given these developments, DCI no longer aligns with the operational needs or future strategies of the Debtors,” the legal team stated .

Despite minimal operations, DCI is still considered to hold valuable franchise potential, indicating a strategic disposal to maximize creditor value amidst FTX’s restructuring efforts.

The bankrupt entity’s lawyers commented :

“DCI is also 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 US.”

FTX Files for Court Approval on Strategic Asset Sale as Part of Financial Rehab Plan

The bankruptcy documentation highlights the strategic rationale behind the proposed sale, focusing on optimizing the estate’s value for creditors and stakeholders. It details the methodical approach and legal basis for the sale initiative.

Assisted by their financial advisor, Alvarez & Marsal North America, LLC, the debtors implemented a targeted marketing strategy for the assets. This strategy involved the development of a bespoke list of potential buyers and proactive outreach to these selected parties, the court filing elucidates.

In its latest court filing, FTX Trading Ltd. and its affiliates request judicial consent for a pivotal transaction aimed at bolstering their financial restructuring and reorganization. The proposed sale of Digital Custody Inc. (DCI) is framed as a deliberate move to liquidate assets beneficially for creditors.

This action aligns with FTX’s broader divestiture strategy, including the planned sale of its stake in Anthropic, valued at approximately $1.4 billion, underscoring the company’s commitment to optimizing its estate for stakeholder recovery.