In the aftermath of the FTX crash in November 2022, a substantial amount of cryptocurrency, worth billions of dollars, remained locked in the exchange’s wallets. These dormant tokens have been mired in legal battles between the exchange and its creditors for an extended period. However, recent activity suggests that a significant portion of the FTX wallet tokens is now in motion, raising concerns among market observers and participants.
The Movement of FTX Wallet Tokens
The FTX wallets still hold an extensive array of various tokens, with a total value exceeding $3.5 billion. Notably, Solana (SOL) comprises a substantial portion of these funds, as the exchange was a prominent supporter of this Layer 1 blockchain and received a significant allocation of vested SOL tokens in return. Given the considerable value held by the wallets, any movement of tokens attracts attention.
On Sunday, a user on X (formerly Twitter) drew attention to the large sums being transferred out of the FTX wallets. It was reported that over $1.5 billion worth of SOL, SPL tokens, and Wrapped Bitcoin had been shifted from FTX’s Solana addresses. The user expressed concerns that these transfers might be an indication of an impending sell-off. Notably, the user highlighted the approximately $200 million worth of Wrapped Bitcoin on the Solana network held by the FTX wallets, urging the community to monitor the situation closely.
Speculations and Potential Sell-Off
The transferred tokens, beginning from August 31, included Ethereum’s ETH, FTX’s FTT token, Sushiswap’s SUSHI, and Uniswap’s UNI, among others. The total value of the transferred assets amounted to roughly $14 million. While these tokens were shifted to another holding wallet using the Wormhole Bridge, speculation regarding a potential sell-off began circulating. The X user’s comment about FTX “gearing up for potential sell-offs” added fuel to the fire.
An important development occurred at the end of August, shedding light on the potential destination of the transferred tokens from the FTX wallets. The exchange filed a motion on August 24 to engage the services of asset manager Galaxy Digital to mitigate volatility risks associated with its remaining assets. The proposed Investment Services Agreement would grant Galaxy Digital control over FTX’s assets, aiming to safeguard their value and capitalize on investment decisions made by the asset manager.
Considering that the token transfers commenced a week after the filing, it is plausible that FTX is moving assets under the custody of Galaxy Digital. However, this move could still result in a sell-off, as FTX would need to secure the most favorable terms reasonably available, potentially selling up to $100 million in tokens per week.
Interestingly, the transfer of coins occurs just weeks before FTX founder Sam Bankman-Fried’s scheduled trial on fraud and mismanagement charges. While SBF’s defense team may request a trial postponement, as allowed by the court, the current expectation is that the former CEO will stand trial on October 3. These legal proceedings add an additional layer of complexity and speculation to the overall situation.
The recent movement of tokens from the FTX wallets has sparked intense speculation and concern within the cryptocurrency community. With billions of dollars worth of assets still held in these wallets, any transfer raises questions about the exchange’s intentions and the potential for a sell-off. The involvement of asset manager Galaxy Digital further amplifies these concerns, as it could lead to significant market movements depending on the investment decisions made. As the trial date for FTX founder Sam Bankman-Fried approaches, the situation becomes even more uncertain. It is crucial for market participants to closely monitor these developments and remain vigilant in assessing the potential impact on the broader cryptocurrency landscape.