FTX, one of the largest cryptocurrency exchanges in the world, has announced that it plans to sell its Grayscale Bitcoin Trust (GBTC) shares on the secondary market. GBTC is a popular investment vehicle that allows investors to gain exposure to Bitcoin without holding the actual cryptocurrency. GBTC shares trade at a premium or discount to the net asset value (NAV) of the underlying Bitcoin, depending on the supply and demand dynamics.
According to the motion filed at the bankruptcy court in Delaware, FTX has reached an agreement with a group of investors, led by Paradigm Capital, to purchase some of its trust assets for $150 million. The trust assets include FTX’s stakes in various crypto projects, such as Solana, Serum, and FTX Token. The sale would allow FTX to repay its secured and unsecured creditors, who are owed more than $200 million.
FTX claims that the sale is in the best interest of its stakeholders, as it would provide a quick and efficient resolution of its bankruptcy case. FTX also argues that the sale is fair and reasonable, as it reflects the current market value of the trust assets and was negotiated at arm’s length. FTX says that it received multiple offers from potential buyers but chose Paradigm Capital as the highest and best bidder.
The motion is subject to approval by the bankruptcy court, which will hold a hearing on November 15. If approved, the sale would mark one of the largest transactions involving crypto assets in a bankruptcy context. The sale would also have implications for the crypto industry, as it would demonstrate the viability and liquidity of crypto assets as a form of collateral and payment.
FTX CEO Sam Bankman-Fried said that the exchange acquired about $1.7 billion worth of GBTC shares earlier this year, when the premium was around 10%. However, since then, the premium has turned negative, meaning that GBTC shares are trading below the NAV of Bitcoin. This has resulted in a loss for FTX and other GBTC holders, who are locked in for six months before they can sell their shares.
Bankman-Fried said that FTX is looking for buyers who are willing to pay a fair price for the GBTC shares, which he estimated to be around 0.5% below NAV. He said that FTX is not interested in holding GBTC for the long term, as it prefers to invest in Bitcoin directly or through other products. He also said that FTX is open to selling its GBTC shares to Grayscale itself, if the trust decides to buy back its own shares.
The negative premium of GBTC has been a source of concern for many investors, who fear that it could affect the performance and reputation of the product. Some analysts have suggested that Grayscale should convert GBTC into an exchange-traded fund (ETF), which would allow for more liquidity and arbitrage opportunities. However, Grayscale has not indicated any plans to do so, as it faces regulatory hurdles and competition from other Bitcoin ETFs that have been approved in Canada and Europe.
FTX filed for Chapter 11 bankruptcy protection in the U.S. bankruptcy court of Delaware. This means that FTX is unable to pay its debts and needs to reorganize its business under the supervision of the court. FTX has more than $200 million in liabilities, mainly to its creditors who lent money or provided services to FTX.