ROADBLOCK: U.S. Trustee Challenges FTX Asset Sales

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According to Reuters, U.S. Bankruptcy Trustee Andrew Vara has filed an objection to FTX's proposed sale of certain of its assets. Said objection was filed in the US Bankruptcy Court, District of Delaware, on January 7, 2022.

Within the bankruptcy, in an attempt to recover some of the customer's lost funds, FTX had proposed and planned to sell its Japanese and European units, LedgerX derivative exchange, and Embed stock clearing unit. In a December 15, 2022 court filing, FTX lawyers maintained these sales would maximize value to the FTX bankruptcy estate. The FTX lawyers further maintained that the sale of these assets would be 'simpler' as the units were operated independently from FTX (having their own management teams and separate customer accounts) and were more recently acquired assets.

It should be noted that the Japanese unit was subjected to suspension and improvement orders in November 2022, and, the European unit subjected to license and operation suspension orders on November 9, 2022.

Nonetheless, Trustee Vara's objection claims that the FTX bankruptcy sale could compromise certain FTX valuable information. Specifically, Vara states in the objection:

The sale of potentially valuable causes of action against the Debtors' directors, officers and employees, or any other person or entity, should not be permitted until there has been a full and independent investigation into all persons and entities that may have been involved in any malfeasance, negligence or other actionable conduct.

[Saligrama, A. U.S. Trustee files objection to FTX's planned asset sales. (Accessed January 8, 2023)].

Auctions for the sale of these asset were slated to occur in accordance with the following schedule:

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Cointelegraph reports that more than 110 parties have expressed interest in acquiring one or more of the 134 companies covered by the FTX bankruptcy. So far, FTX has reportedly entered into 26 confidentiality agreements with its counterparties.

Disposition of the Trustee's objection will be required prior to the occurrence of any auction sale of FTX assets.

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