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  • FTX raises cash to $4.4 billion by selling crypto assets, seeking to reimburse clients after collapse in 2022.
  • FTX’s strategy includes trading Bitcoin derivatives, facing legal and financial challenges in bankruptcy proceedings.

FTX, once an industry colossus, faces its biggest challenge: repaying its customers. How is it doing it? By selling crypto assets and accumulating cash, a strategy that has taken its cash from $2.3 billion to $4.4 billion by the end of 2023. Is this increase enough to cover its customers’ losses?

FTX, with its reputation damaged by fraud, has opted for an emergency tactic. Advisors have put some of their digital assets up for sale, raising $1.8 billion through December 2022. In addition, they are maneuvering in the Bitcoin derivatives market, seeking not only to hedge against the cryptocurrency’s volatility but also to generate additional returns. Will this be the solution to their financial woes?

Source: Bloomberg analysis of FTX’s Chapter 11 operating reports

With every move, FTX is trying to write a new chapter in its history

Asset sales and derivatives transactions are not only aimed at stabilizing the company, but also at exploring the possibility of reviving the platform. However, the road is uphill. Despite its efforts, the company has admitted that clients are unlikely to be reimbursed in full.

Customers, in particular, face a bleak outlook. They are expected to bear a larger percentage of the losses. This has led several of them to challenge the company’s decisions, especially the one that sets the value of their digital assets upon bankruptcy filing. The concern is obvious: they would lose the opportunity to benefit from any recovery in the value of Bitcoin and other cryptocurrencies.

FTX has also found it necessary to take legal action. It has filed lawsuits against former associates and firms such as Bybit Fintech Ltd. that withdrew funds prior to the bankruptcy filing. This situation reflects a complex and challenging landscape for FTX, which is desperately seeking to get back on its feet.

The customer claims situation is another critical issue. Claims in excess of $1 million were trading at 73 cents on the dollar, up sharply from 38 cents on the dollar in October. However, these values vary depending on the specific claim and other factors, adding a layer of uncertainty to the already complicated scenario.

FTX is at a critical point

Its efforts to regain stability and refund customers are a reflection of the challenges facing the cryptocurrency industry. The company, under case number 22-11068 in the U.S. Bankruptcy Court for the District of Delaware, is still struggling to find a path to recovery, both for itself and its affected customers.

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