estate

FTX wants permission to sell FTX Japan and FTX Europe as well as LedgerX

The four businesses FTX wants to sell had only recently been acquired, and lawyers argue this simplifies the sale process.

Lawyers representing FTX are seeking permission from a U.S. bankruptcy court to sell off the firm’s Japanese and European branches, derivatives exchange LedgerX and stock-clearing platform Embed.

The lawyers note in their Dec. 15 filing that each of these businesses has been under pressure from regulators, which “merit[s] an expeditious sale process,” adding:

“The longer operations are suspended, the greater the risk to the value of the assets and the risk of a permanent revocation of licenses.”

FTX Japan is currently subject to business suspension and improvement orders, while FTX Europe has had its licenses and operations suspended.

They also point to the loss of customers and employees the businesses have experienced since FTX filed for bankruptcy on Nov. 11, and believe selling these businesses now would allow the resumption of operations and therefore maximize value to the FTX estate.

The lawyers said these businesses were recently acquired and have been operating relatively independently of FTX, which would make a potential sale process much less complex.

Assuming there is more than one potential bidder, the auctions for the businesses would start with Embed on Feb. 21, with the other three occurring the following month.

Proposed auction dates for the four businesses. Source: CourtListener

More than 110 parties are said to be interested in purchasing one or more of the 134 companies included in the bankruptcy proceedings, and FTX has already entered into 26 confidentiality agreements with counterparties interested in the businesses or assets of FTX.

LedgerX in particular has been hailed as a success story during the bankruptcy proceedings of FTX, with Commodity Futures Trading Commission Chairman Rostin Behnam noting that the firm had essentially been “walled off” from other companies within FTX Group, and “held more cash than all the other FTX debtor entities combined.”

FTX wants to sell off parts of its failed crypto empire before they lose too much value or have their licenses permanently revoked, arguing that the sales would be in the best interests of all stakeholders.

FTX Japan drafts plan to return client funds

The Japanese subsidiary is one of 134 companies caught up in FTX’s bankruptcy proceedings but has been drafting a plan to return client funds.

The Japanese subsidiary of the now-defunct FTX crypto exchange has come out with a roadmap to resume withdrawals after confirming that its customers’ assets are not part of FTX’s bankruptcy proceedings.

The firm provided an update on Dec. 1, stating it has been able to confirm that its customers’ assets “should not” be part of FTX Japan’s estate due to Japanese regulations, which mandate that crypto exchanges must separate client funds from their own assets.

This was according to Landis Rath & Cobb LLP, the law firm representing FTX Group in the Chapter 11 bankruptcy proceedings.

FTX Japan was only launched in June this year after acquiring Japanese crypto exchange Liquid on Feb. 2. It was aimed at serving the exchange’s Japanese customers.

However, with liquidity issues experienced by its parent company in early November, withdrawals were halted at FTX Japan on Nov. 8, similar to its parent company.

Days later, the Financial Services Agency of Japan announced on Nov. 10 it had taken administrative action against FTX Japan and ordered it to suspend other business operations such as accepting new deposits and to comply with a business improvement order.

The company was then listed as one of the 134 companies that formed part of FTX Trading’s Chapter 11 bankruptcy filing on Nov. 11.

Since then, FTX Japan has claimed its primary focus is to re-enable withdrawals and is reportedly aiming to do so by the end of 2022.

With the recent confirmation that its users’ assets are not considered part of FTX Japan’s estate, this would effectively provide them with a pathway to resume withdrawals for its users.

“Japanese customer cash and crypto currency should not be part of FTX Japan’s estate given how these assets are held and property interests under Japanese law,” the firm noted.

FTX Japan said its management is in regular dialogue with Japanese regulators and has sent through the first draft of their plan to resume withdrawals, suggesting regular consultations will occur “as key milestones are met.”