Beleaguered FTX Dumps Two-Thirds of Solana Holdings at Deep Discount

FTX sold approximately two-thirds of its $2.6 billion in Solana tokens for a significantly discounted price of $64 per token, generating up to $1.9 billion for the bankrupt exchange's estate. Buyers included Galaxy Trading and Pantera Capital, with Galaxy Trading reportedly raising $620 million for a fund to purchase the tokens and charge investors a 1% management fee. The sale has raised concerns among FTX customers, who argue that the discounted sale deprives them of potential gains that could help repay their losses.

The beleaguered crypto exchange FTX, which filed for bankruptcy in November 2022, has offloaded roughly two-thirds of its Solana (SOL) holdings in a deeply discounted transaction. Sources privy to the matter informed Bloomberg that FTX's bankruptcy administrators orchestrated the sale, unloading SOL tokens at a price of $64 apiece. The sale netted approximately $1.9 billion for the estate, a substantial sum given the token's trading price of around $177 at the time of publication. However, it bears mentioning that SOL has experienced a decline of 6% over the past day.

"While this may be a lucrative deal for those acquiring SOL, I believe that creditors have been shortchanged," opined Louis d'Origny, an FTX customer and the founder of FTX Creditor, a platform for purchasing claims. "We should have been afforded the opportunity to gradually realize the proceeds rather than receiving them in a lump sum. The debtors evidently do not attribute significant value to crypto assets."

Among the entities that participated in the transaction were Galaxy Trading, an affiliate of Mike Novogratz's Galaxy Digital, and Pantera Capital. Galaxy Trading reportedly amassed close to $620 million for a fund specifically established to acquire SOL from the FTX estate. The fund will charge investors a 1% management fee while providing them with staking yield.

Last August, FTX retained the services of Galaxy Asset Management, another Galaxy Digital entity, to spearhead the sale of the estate's vast cryptocurrency holdings. Additionally, Bloomberg reported last month that asset manager Pantera had raised funds to purchase up to $250 million worth of SOL from the estate. Vancouver-based software firm Neptune Digital Assets announced its acquisition of SOL worth $1.7 million last week.

In January, Judge John Dorsey, who is presiding over the case, ruled that each claim should be valued based on the amount owed to the creditor on the day FTX filed for bankruptcy. However, it is noteworthy that on November 11, 2022, SOL was trading at $16, which is approximately 9% of its current market price.

Solana did not respond to a request for comment.

In the wake of the sale, FTX creditors have expressed their dissatisfaction. "Once you're finished expressing your gratitude to the lawyers for draining the estate one hour at a time, please extend your thanks to Galaxy for selling the locked SOL at a nearly 75% discount to themselves," remarked Mitchell (@WR_Crypto) on Twitter.

During the sentencing of FTX co-founder and former CEO Sam Bankman-Fried, Sunil Kavuri, a victim of the collapse, vehemently objected to the sale of tokens at a discount before Judge Lewis Kaplan. Kavuri argued that the assets rightfully belong to the exchange's former customers, who should be the ones realizing the gains. "Sam continues to perpetuate the lie that we will be fully compensated," he told the court, rejecting the notion that FTX customers are "unsecured creditors."

"I believe Galaxy's private wealth management arm is reaping substantial benefits," stated Thomas Braziel of 117 Partners and a broker of bankruptcy claims, in an interview with Fortune. Braziel alluded to the fact that Galaxy has secured both a role in the estate's disinvestment and the opportunity to acquire assets. "They have allocated themselves a rather sizable portion."

"I do not believe shareholders have a legitimate grievance regarding the discount—that is simply the prevailing market sentiment," Braziel added, suggesting that discounts may be reduced for future blocks of tokens. "We typically begin with a substantial discount and gradually reduce it over time based on market feedback. It is analogous to the approach employed by bankers when liquidating assets."

This article was originally published on Fortune.com.