The bankrupt exchange's unit, Digital Custody Inc., which FTX bought for $10 million, sold for just $500k to CoinList.
FTX will sell Digital Custody Inc. (DCI) to CoinList for 95% less than it bought in 2022.
DCI's original CEO will provide financing to CoinList for the purchase.
Debtors said that DCI remains a valuable franchise, given it has already acquired a custody license from South Dakota.
Sam Bankman-Fried's defunct exchange FTX plans to sell one of its units it bought for $10 million just months before bankruptcy, for a mere $500,000 to the token sale platform CoinList.
FTX purchased Digital Custody Inc. (DCI) for a total price of $10 million on Aug. 6, 2022, from Digital Finance Group and DCI's CEO Terrence Culver, according to a court filing. The exchange filed for bankruptcy on Nov. 11 that same year after CoinDesk unveiled that not everything was as it seemed for Bankman-Fried's empire.
DCI was initially bought to provide custodial services for FTX.US and U.S.-based LedgerX, but due to the collapse of the FTX empire, it was never integrated into either operation. Following the sale of LedgerX – and after FTX said it wouldn't restart or sell its exchange – DCI had "relatively few operations," according to the court filing. Still, DCI remains a valuable franchise, given it has already acquired a custody license from South Dakota, according to the filing.
"The Debtors believe that a prompt sale of the Interests will enable the Debtors to defray or avoid any further and additional operational, carrying or other expenses associated with the Interests," the filing said. "DCI is also no longer useful to the Debtors’ business given the Debtors’ sale of LedgerX and that it is unlikely for the Debtors to sell or restart FTX US," the filing added.
The debtors of FTX won't hold an auction for the sale but will be able to consider higher bids from other parties up to three days before the hearing of the sale. FTX debtors have already evaluated bids from other interested buyers and decided that a sale to CoinList and Culver would be the best outcome, given Culver's previous role in DCI getting its license in South Dakota and ability to execute the purchase quickly, according to the filing.
Culver will provide financing to CoinList via convertible notes for the purchase. There is a $50,000 break-up fee associated with the deal if it falls apart.
FTX said it eventually plans to repay all its creditors and has been trying to offload some of its subsidiaries as part of its bankruptcy process. Most recently, the exchange said it plans to sell a stake in artificial intelligence (AI) startup Anthropic, in which FTX and sister investment firm Alameda invested $500 million in 2021.
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