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After the collapse in 2022, FTX is finding ways to restructure its debt settlements with its creditors by liquidating its assets.
FTX, which has recently gone bankrupt, is taking steps to settle its debts with creditors by selling its assets. It has issued a warning about its investment manager to ensure caution during this process.
FTX and The Mystery of Its Collapse
FTX raised $400 million in Series C funding in early 2022, increasing its valuation to over $32 billion. However, the exchange filed for bankruptcy just ten months after its acquisition by Binance fell through.
FTX has highlighted its concerns with centralization in the crypto ecosystem. The lack of clear regulatory guidelines can lead to opaque decision-making, which may cause crypto giants to self-implode.
As explained by the former exchange, the terms and conditions for unlocking holdings would still apply when the FTX Debtors sell locked digital assets.
As the bankrupt FTX exchange gets ready to settle its obligations to creditors impacted by its 2022 collapse, it warns the public about its only authorized investment manager.
FTX Posted on March 1
On March 1, FTX posted on X and stated that Galaxy Asset Management, the authorized investment manager, is solely responsible for managing the sale of digital assets by FTX Debtors mandated by the bankruptcy court. Moreover, the unauthorized parties are soliciting bids for FTX Debtors.
In recent months, the bankrupt exchange has made active efforts to restructure and repay its creditors. FTX is using assets worth $7 billion, which it has recovered, to repay former customers.
FTX has been granted permission by the United States Bankruptcy Court for the District of Delaware to divest its holdings of over $1 billion in Anthropic, an artificial intelligence (AI) company, as of February 22.
What Was the Impact of FTX Collapse on the Market?
The impact of the FTX collapse on various financial markets, including equities, currency, cryptocurrency, metals, and energy, was determined using the standard event methodology.
The impact of the FTX collapse was limited, with the most significant reaction being confined to cryptocurrency markets. Traditional asset classes showed little reaction. There were adverse reactions for Bitcoin, Ethereum, and the Binance coin, while equities, energy, and currency markets remained unaffected.
Positive abnormal returns for gold could be considered consistent with investors moving into safe-haven assets.
When abnormal returns were accumulated (CARs) over the 12-day event window, the results remained insignificant for equity markets, fiat currencies except JPY/USD, and crypto markets except for Bitcoin, Ethereum, the Binance coin, gold, and silver. It means the volatility was not so much due to the event.
The average Ars were significant and negative on the event day and day +1, while the CARs aggregated across all markets were significant and positive on either day -2 and day -1 around the FTX collapse. It means little to no effect was seen in the traditional equity and commodity markets.
Summary
FTX clarified that digital asset sales are exclusively overseen by authorized investment manager Galaxy Asset Management. The collapse of the FTX waved all over the world and impacted traditional assets lightly. However, the cryptocurrency world was heavily affected by it.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos or any other related indexes comes with a risk of financial loss.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
