BitGo to take custody of FTX assets in bankruptcy procedure

Crypto custodian BitGo has been nominated as the official custodian to safeguard the remaining funds at FTX. Acting CEO John Ray III selected BitGo to take custody of the assets of the crypto exchange for the duration of the bankruptcy proceedings.

FTX filed a motion to acquire a custodian in relation to the bankruptcy process on Nov. 23. A hearing is scheduled for Dec. 16 to confirm the appointment. Co-Founder of BitGo, Mike Belshe commented,

BitGo’s mission is to “deliver trust in digital assets” – and crypto needs that more than ever. By helping in this case, we intend to do our part to restore trust to our industry.”

Further, Belshe remarked, “when you break down FTX subsidiaries, the ones that used BitGo products are solvent and safe. The ones that didn’t, aren’t.”

BitGo custody services

BitGo is one of the major players within the crypto custody sector, holding assets on behalf of many institutional investors, banks, and crypto exchanges. Clients include Panterra Capital, Swissborg, Coinjar, Ripple, Nexo, and many others.

As well as custody services, BitGo offers trading, staking, wallet services, portfolio management, and Bitcoin settlement. Further, it provides custody services for over 35% of all crypto exchanges.

It also has custody of the Mt. Gox Bitcoin, which was hacked in 2014, ceased trading, and filed for bankruptcy. Creditors selected BitGo as the sole custodian of Mt. Gox assets. The Bitcoins are being held on behalf of customers who had their Bitcoin locked into the exchange, a similar situation to the one currently ongoing at FTX.

BitGo’s Co-Founder had strong words about former FTX CEO Sam Bankman-Fried,

“SBF committed financial fraud, this is not a crypto issue but a market structure issue. Trading, financing, and custody need to be different. BitGo has been advocating that for years, and it’s time to start making it a reality for the good of crypto.”

CryptoSlate spoke with someone close to the company regarding the status of the crypto custodian amid widespread fear, uncertainty, and doubt in the crypto industry.

The company also has a ‘qualified custody’ license meaning that client assets are “bankruptcy remote.” The source remarked, “even if BitGo burns to the ground…it operates like a bank… it is never comingled and never moved unless you, as the owner, determine where it goes.”

Comments shared with CryptoSlate from Belshe added,

“SBF proved that there is no such thing as a “safe” conflict of interest. Trading, financing, and custody need to be different. BitGo has been advocating that for years, and it’s time to start making it a reality for the good of crypto.”

Not all custody is created equal.

BitGo is licensed in South Dakota, New York, Switzerland, and Germany. A person familiar with the matter stated,

“Not all custody is created equal. There’s not another peer that is doing what BitGo is doing right now.”

They remarked that “BitGo is one of the most secure and reliable custodians for any institution” due to the qualified custodian status, multiple licenses, diligent internal risk management, and a lack of “conflict of interest.”

In a further seal of approval, BitGo is the custodian for wallets in El Salvador and has recently confirmed a partnership with Nike in relation to its new NFT initiative.

Talking about the current market climate, the source asserted that “BitGo has a very healthy balance sheet.” However, a recent Forbes article claimed that BitGo was seeking investment amid market turmoil and a failed acquisition from Galaxy.

CryptoSlate’s source confirmed that the reason for the breakdown in the Galaxy deal was solely due to a decision by the SEC not to allow Galaxy to be listed on the New York stock exchange. It was nothing to do with the business practices at BitGo. Further, they remarked, “Galaxy is still an investor in BitGo and has access to all of the financials.”

“The truth of the matter is since we are BitGo is no longer in talks with Galaxy it is now open to pursuing other opportunities. This started in August.”

Retail facing custody

In an exciting announcement for non-institutional investors, the source confirmed that “BitGo is looking to scale operationally to make products available to investors who hold less than 1BTC.”

Custodial services of the nature of BitGo are not usually accessible to ordinary investors. Therefore, the news of BitGo opening institutional-grade custodial services for retail crypto holders will be welcomed by those whose faith has been rocked by recent events.

UPDATE 11 PM GMT: Another document filed by FTX requested a motion to pay “critical vendors” up to $8.5 million.