FTX’s legal team explained that the sale of Digital Custody Inc. was necessary since the estate didn’t see any value in the company because FTX U.S. hasn’t been restarted.
Digital Custody Inc. (DCI), which the FTX Debtors estate, lead by CEO John Ray III, purchased for $10 million, has filed to be sold. DCI’s original seller and CEO, Terence J. Culver, supplied funding for the $500,000 markdown. DCI was purchased to provide custodial services for FTX U.S. and LedgerX, per FTX’s court petition.
Three months after purchasing DCI, in November 2022, former CEO Sam Bankman-Fried filed for bankruptcy, so DCI was not completely included into the FTX ecosystem. In December 2021 and August 2022, DCI was acquired by FTX as a subsidiary through two separate $5 million deals.
Additionally, FTX’s legal team made it clear that Digital Custody Inc. isn’t worth much to the estate because FTX U.S. hasn’t been revived. They claim that “it is unlikely for the Debtors to sell or restart FTX U.S.” and that “DCI is no longer useful to the Debtors’ business, given the Debtors’ sale of LedgerX.”. But DCI continues to be in possession of a custodial licence from the Division of Banking in South Dakota.
The Debtors evaluated three offers, one of which came from Culver. Based on the buyer’s superior offer, speed of closing, and advantageous relationship with Mr. Culver—which is thought to speed up regulatory approval—they chose the buyer.
The transaction was approved by the Committee and the Ad Hoc Committee of Non-US Customers of FTX.com, according to FTX’s legal staff. But according to the terms of the deal, FTX can wait until three days before the close to look for a better offer for DCI. $50,000 will be charged as a reverse termination fee if the buyer backs out of the agreement.
The now-defunct cryptocurrency exchange FTX has made it clear that its restructuring goals were to reimburse consumers in full rather than to “reboot” the business. FTX attorney Andy Dietderich stressed at a court hearing on January 31 that, in spite of great efforts, there is no intention to restart FTX—also known as FTX 2.0—in the present Chapter 11 bankruptcy plan.
Before this, a large number of FTX users requested that a U.S. bankruptcy judge stop the defunct cryptocurrency exchange from evaluating their cryptocurrency deposits based on 2022 values. They said that by taking this stance, they were unable to profit from the recent spike in cryptocurrency prices.