The former cryptocurrency exchange, FTX, now defunct, has brought onboard the crypto company Galaxy to manage its vast crypto holdings via selling, staking, and hedging techniques.
Crypto magnate Mike Novogratz’s firm, Galaxy, is set to advise FTX, with the aim to shield it from harmful price fluctuations, as detailed in recent court documents disclosed on Wednesday.
Following its notable downfall last November, FTX’s strategy is to compensate its creditors in regular fiat currencies instead of Bitcoin (BTC) or Ethereum (ETH).
Despite this, FTX plans to adopt careful trading practices to avoid considerable losses on its crypto assets, which have a current worth exceeding $3 billion.
FTX’s legal team stated in the filings that, “By hedging Bitcoin and Ether, FTX aims to minimize potential losses before selling these assets. By staking certain cryptocurrencies, the company will produce steady returns, benefiting both the company and, eventually, the creditors.”
To enhance the value offered to clients awaiting reimbursement, FTX plans to accrue interest on its cryptocurrency assets.
Now under the stewardship of restructuring specialist, John J. Ray III, FTX is wary of a large-scale sell-off, which might result in a significant price plunge, likely favoring short-sellers and other market players.
To counteract this, FTX is seeking expert opinions from market specialists, who might advise implementing tactics such as setting weekly sales caps.
The documentation acknowledged that “Galaxy Asset Management possesses deep knowledge pertinent to managing and trading digital assets, especially concerning intended transaction types and investment goals.”
Earlier, Galaxy Digital, a segment of Novogratz’s vast crypto enterprise, admitted having sizeable investments in FTX when the exchange declared bankruptcy.
FTX’s Plans for a Comeback FTX’s revamped leadership recently unveiled plans to reintroduce the exchange, but only for international clients.
A recent document suggests that FTX is considering classifying its creditors into various groups to ensure they receive their due claims.
The momentum to rejuvenate FTX has been building, given the platform’s success in retrieving assets worth over $7.3 billion in liquid form.
As per sources, the venture capital firm Tribe Capital has shown interest in spearheading a fundraising initiative for FTX, targeting $250 million.
In comparison, other insolvent crypto enterprises like Celsius have opted to liquidate cryptocurrencies directly, such as BTC and ETH.
In a more recent development, BlockFi, another bankrupted crypto lender, attempted to thwart FTX and Three Arrows Capital (3AC) from recouping billions exchanged before their 2021 collapse.
On Monday, in a court document, BlockFi blamed both FTX and Three Arrows Capital for its predicament, contesting their claim to recover $5 billion.
FTX is also pursuing a $90 million reimbursement from withdrawals made by BlockFi from FTX.com, in addition to $400 million in repayments from its trading entity, Alameda Research, among other special payments.
