FTX files for sale of 4 of its solvent subsidiaries

FTX has filed a request with the Delaware Bankruptcy Court to authorize the bidding process for four of its solvent, independently operating subsidiaries. According to the court filing the troubled company hopes to offload Embed Technologies, LedgerX LLC, FTX Japan and FTX Europe within the next two months.

FTX filed for bankruptcy in early November after facing an excruciating liquidity crisis that caused it to halt withdrawals. The bankruptcy filing affected all of its 100 subsidiaries, including FTX US and Alameda Research. One of John Ray III’s first statements after his appointment as the company’s new CEO after the bankruptcy was that not all of the exchange’s subsidiaries were in trouble.

To date, FTX has stated that it has received a number of unsolicited offers from interested companies seeking to purchase the named entities. The company disclosed in the filing that if the court did not grant approval to sell these entities, their valuations could be significantly impacted as a result of the stay of operations.

“Licenses held by FTX Europe have been suspended, and FTX Japan is under suspension“, the petition reads. “The longer operations are suspended, the greater the risk to asset value and the risk of permanent license revocation.“

The funds from these sales will be used to compensate FTX’s creditors, who claim to owe billions of dollars.

Independent operations for healthy balance sheets

At its peak, FTX Derivatives Exchange made a number of targeted acquisitions that helped it establish itself as a market leader in the digital currency ecosystem. Some of these acquisitions came with an independent trading agreement, a clause that allowed all of these subsidiaries to be protected from the liquidity issues of the parent company.

Embed Technologies operates a clearing and custody service for financial services providers as well as broker-dealers. Embed Technologies is regulated by the U.S. Securities and Exchange Commission (SEC) as a FINRA registered broker-dealer.

One of the subsidiaries, LedgerX, is regulated by the Commodity Futures and Trading Commission (CFTC) and provides a derivatives trading platform for customers in the United States. FTX Japan Holdings also operates independently and has two other operating subsidiaries, FTX Japan and FTX Singapore.

According to the filing, the company is interested in selling FTX Japan Holdings as a whole or 100% of its constituent subsidiaries.

“FTX is inviting bids for the sale of 100% of the interests of FTX Japan Holdings or for the separate sale of 100% of the interests of FTX Japan and FTX Singapore.”

The filing revealed different proposed offer dates for each of these companies, including Jan. 18 for Embed Technologies, Jan. 25 for LedgerX and Feb. 1 for FTX Europe, the exchange’s Swiss-based equity derivatives platform.