FTX Bankruptcy Estate Switches to Auction for Remaining Solana Holdings

FTX, the collapsed crypto exchange, plans to auction its remaining locked Solana (SOL) tokens, marking a shift from previous fixed-price sales. This move aims to maximize recovery value and will involve the establishment of a Special Purpose Vehicle (SPV) to facilitate participation from both accredited U.S. and non-U.S. investors. The auction will allow community-based decision-making on bid prices, with $1 equaling one vote, and interested parties can invest using various cryptocurrencies.

FTX Bankruptcy Estate Pivots to Auction Strategy for Remaining Solana Tokens

New York, April 21, 2024 - The bankruptcy estate of the defunct cryptocurrency exchange FTX has announced a shift in its token liquidation strategy, opting for an auction-based sale of its remaining locked Solana (SOL) tokens. The decision is intended to optimize market value recovery, following the sub-market-price sales of its token holdings in recent weeks.

The announcement was made by Mike Cagney, CEO of crypto exchange Figure Markets, via a tweet on April 20th, 2024. According to the tweet, the exact details of the auction will be released on Monday.

"Just got confirmation that the next round of locked #solana coins from the #FTX estate will be an auction, with exact details coming Monday. If you want in, join us," Cagney tweeted.

Departure from Previous Liquidation Method

The auction model marks a departure from FTX's previous token liquidation approach, which involved selling tokens at fixed market prices. In March 2023, FTX began offloading its $7.5 billion stash of locked SOL tokens, often at substantial discounts. For example, one transaction recorded the sale of 26,964 SOL at $64 per token, representing a 67% markdown from the market value at the time.

Community-Based Decision-Making

Figure Markets, an active participant in the upcoming auction, is establishing a Special Purpose Vehicle (SPV) to facilitate participation for both non-U.S. and accredited U.S. investors. The SPV will empower community-based decision-making on bid prices, with $1 equating to one vote. Interested parties can invest using U.S. dollars, USDC, Bitcoin, and Ether.

Previous Sales and Involved Parties

In August 2023, FTX appointed Galaxy Digital CEO Mike Novogratz as its investment manager, entrusting him with the oversight of the $3.4 billion sale of Bitcoin, Ethereum, Solana, and other cryptocurrencies.

In early March 2023, Pantera, a $5.2 billion asset manager, raised funds for a Pantera Solana Fund with the intent of purchasing up to $250 million of SOL from the FTX estate. Later that month, Neptune Digital Assets Corp. announced the acquisition of 26,964 SOL for $1.7 million.

Positive Reception from Creditors

The transition to an auction-based sale method has been well-received by some FTX creditors, particularly those who felt disadvantaged by the earlier fixed-price sales. Suni Kavuri, an activist and vocal critic representing some of the creditors, commended the new approach for offering a more accessible entry point for smaller investors. The minimum investment for the auction is set at $5,000, compared to the previous $5 million threshold for direct purchases.

Legal Concerns and Class-Action Lawsuit

Kavuri has been a staunch opponent of how Sullivan & Cromwell—the law firm overseeing FTX's bankruptcy proceedings—has managed the exchange's assets. He contends that the firm's valuation methods have significantly undervalued the assets, potentially harming the creditors' potential recovery.

Kavuri's grievances are part of a broader class-action lawsuit against those involved in managing FTX's bankruptcy estate. The lawsuit seeks reparation for the alleged diminishment of the creditors' assets.

Conclusion

The FTX bankruptcy estate's decision to implement an auction-based sale for its remaining SOL tokens signals a shift in its token liquidation strategy. The move aims to maximize market value recovery and address concerns raised by creditors regarding the previous fixed-price sales. The auction details will be announced on Monday, and participation will be facilitated through a Special Purpose Vehicle set up by Figure Markets. The transition has been met with positive feedback from some creditors, while legal challenges related to the management of FTX's assets continue to unfold.