FTX Estate Wants to Hedge Bitcoin, Ethereum With Mike Novogratz's Galaxy Digital

By Pedro Solimano

Bankrupt crypto exchange FTX is looking to put its remaining assets safe via hedging arrangements or put to work earning yield, per new court documents.

Lawyers in charge of the firm’s unwinding filed the request yesterday, asking the bankruptcy court if it’s allowed to stake, among other activities, its idle crypto.

The legal team has also requested they be allowed to sell certain digital assets the company has recovered, mainly Bitcoin and Ethereum.

"Hedging of Bitcoin and Ether—two digital assets for which there is a liquid hedging market—will provide a means to lessen the Debtors’ exposure to adverse price movements in Bitcoin and Ether prior to their sale," reads the filing.

As part of what’s called their “Digital Asset Management and Monetization Program,” the company aims to enlist Mike Novogratz and Galaxy Digital as its investment adviser.

Novogratz and company will be charged with “creating and preserving value” for the FTX estate given a significant amount of funds are currently held in cryptocurrencies.

An April filing shows that of a whopping $6.2 billion currently available for stakeholder recovery, $3.4 billion is held in crypto.

The idle crypto would generate yield through derivative trading and other so-called “hedging arrangements.” FTX would also make use of staking, a process in which tokens are locked in a network and earn passive interest for doing so.

"The Debtors will stake certain of their Digital Assets in order to generate passive yield," the filing continues.

Notably, Galaxy Digital reported a $76 million dollar exposure to FTX at its collapse.

A subset of guidelines has also been included in the formal request, the majority of which must be approved by the victims of the collapsed exchange.

These include restrictions and allowances for the investment adviser, weekly limits to sales and what the hedging arrangement entails, among other measures.

Earlier this week, after Sam Bankman-Fried’s bail was revoked, lawyers requested he be allowed regular release from jail, citing “unreasonably burdensome” conditions for preparing his criminal fraud trial.

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