Court Allows FTX to Sell $873M in Grayscale Bitcoin Trust Shares as Well as Other Holdings

FTX, a fallen crypto exchange, has been allowed to sell 32 million shares across several digital assets to recoup funds.

As the FTX insolvency tale prevails, the fallen crypto exchange’s advisors have received approval from the court to sell assets held in digital trusts from Bitwise and Grayscale. Currently, their overall value is approximately $873M.

Recovery of FTX Assets Marches Aided by Court Decision

FTX’s overall shares amount to more than 32 million and are divided between five Grayscale trusts and the Bitwise 10 Crypto Index Fund. The Grayscale trusts include the Litecoin Trust (LTCN), Ethereum Trust (ETHE), Ethereum Classic Trust (ETCG), Bitcoin Trust (GBTC), and Digital Large Cap Trust (GDLC).

The insolvency court filing makes it possible for FTX’s insolvency advisors to sell the trust share to recoup finances to pay creditors, which includes exchange clients. As of an October 25 filing, the shares’ collective value was $744M. However, the latest increase in the value of assets such as Ethereum and Bitcoin has increased the shares’ value to an estimated $873M.

Through Grayscale’s publicly traded trusts, investors can acquire exposure to cryptocurrencies without possessing and embracing custody of the primary assets. The firm has a considerable amount of underlying crypto assets for every trust. For instance, Grayscale has Bitcoin worth an estimated $24B for its Grayscale Bitcoin Trust.

Grayscale Bitcoin Trust Stock Surges as ETF Approval Edges Closer

FTX will sell the GBTC stock when the price rallies to its all-time high this year. The surge has eroded the existing discount. As such, FTX would benefit from the high price similar to what Cathie Wood’s Ark Invest realised in its sales series.

GBTC’s and other trusts’ prices vary similar to those of the represented assets but have not historically been aligned. For several years, GBTC traded at a premium over Bitcoin’s price. However, in early 2021, it fell to a discount that widened considerably, peaking at 49% late last year. Currently, it has reduced to just over 8%.

Grayscale is one of the companies trying to run a Bitcoin spot exchange-traded fund (ETF) in the U.S. However, such applications are yet to be approved by the Securities and Exchange Commission (SEC). The company plans to change its Bitcoin Trust to a suitable Bitcoin exchange-traded fund.

In August, the firm won a court verdict against the Securities and Exchange Commission, which had been blocking the decision to evaluate Grayscale’s application for a Bitcoin exchange-traded fund. According to the court, the agency should evaluate and consider the application. However, the agency has not decided on any application. A recent memo showed it met with Grayscale officials for talks.