SINOHOPE TECH is expected to complete the transfer of FTX claims within the next 12 months.

Zhitong App News: SINOHOPE TECH (01611) announced that FTX Group entities (including FTX) filed for bankruptcy protection in the United States on November 11, 2022. As the bankruptcy proceedings have not been completed as of the date of this announcement, the company's wholly-owned subsidiary Hbit Limited (Hbit) still has not withdrawn the legal tender and cryptocurrency (FTX deposits) held at FTX (originally approximately HKD 107 million and HKD 34.579 million). To realize the restricted FTX deposits, the group has submitted an FTX deposit claim (FTX claim) to the liquidator of FTX and is seeking potential assignees for the FTX claim.

The company has assessed the impairment of the FTX deposits and believes that the recoverable amount of the FTX deposits will be lower than the original amount held at FTX. As stated in the annual report, the recoverable amount of the FTX deposits is determined by referencing the market price less the incremental cost of transferring the FTX claim. As of the year ended September 30, 2023, an impairment loss of approximately HKD 85.897 million has been recognized, accounting for approximately 60.6% of the original amount.

In addition to the impairment loss disclosure in the annual report, the company hereby provides additional information regarding market price valuation benchmarks and potential increases in the recoverable amount.

Considering the length of the bankruptcy proceedings and the company's operational funding needs, the company has been actively seeking possible solutions to realize a greater recoverable amount of the restricted FTX deposits in the short term. Since February 2023, the company has been in contact and negotiations with several agents and end buyers in the market regarding the transfer of the FTX claim, and in June 2023, entered into an exclusive agency agreement with an agent experienced in complex bankruptcy and claims transactions.

Due to the unique circumstances of the FTX incident in the industry, and based on the company's observations that several FTX creditors have recently realized the restricted FTX deposits by transferring their FTX claims, management believes that the group can also realize the FTX deposits through transfer in the near future.

The market price for determining the recoverable amount of the FTX deposits is based on the written offer valuation received by the company from the exclusive agent in early October 2023, with a net recoverable amount after deducting agent fees and other professional expenses of approximately 39.4% of the original amount. The company's management believes that using 39.4% as the recoverable ratio for impairment assessment as of the year ended September 30, 2023, is appropriate, as the quotes from online claim trading service providers and other end buyers in the market are close to the written offer provided by the exclusive agent; and even after deducting agent fees and other professional expenses, the net proceeds from the written offer of the exclusive agent remain the highest recoverable amount compared to other end buyers in the market.

With the recovery of the cryptocurrency market, the price of Bitcoin increased from $26,917 on September 30, 2023, to $42,624 on January 29, 2024, while Solana (SOL), one of FTX's main cryptocurrencies, increased from $20.29 on September 30, 2023, to $99.88 on January 29, 2024. In view of this, the company has received several competitive offers from potential transferees regarding the transfer of FTX claims. If the FTX claims can be transferred by the relevant transferees, the amount recoverable will increase from approximately 39.4% in September 2023 to around 70% in January 2024.

Considering the above and to preserve the value of FTX deposits, as of the date of this announcement, the company is actively seeking better offers with lower costs in the market. It is expected to complete the transfer of FTX claims within the next 12 months. Upon completion, the Group will adjust impairment provisions based on the actual recoverable amount of FTX deposits. The company will issue timely announcements to inform its shareholders and potential investors of any progress in the recovery process.