April 19, 2024
booming market for FTX bankruptcy claims
Latest Cryptocurrency News

FTX Bankruptcy Claims Market Heats Up: Major Investors Pour $250 Million into Debt

The market for bankruptcy claims has seen a surge in activity related to debts from the defunct cryptocurrency exchange FTX, with major credit investors eagerly acquiring these debts. Silver Point Capital, Diameter Capital Partners, and Attestor Capital, among others, have collectively invested over $250 million in FTX debts in 2023, as reported by Bloomberg on September 21, citing an analysis of public court filings.

Hudson Bay Capital Management also entered the fray, purchasing a $23 million FTX claim and subsequently selling half of it to Diameter. This growing demand has led to a notable increase in the prices of certain FTX claims throughout the year. Some lower-ranked FTX claims have surged by 191%, rising from $0.12 in early 2023 to approximately $0.35 in recent weeks, according to data from the crypto debt broker Claims Market.

Historical indicative prices for ‘bid and ask’ quotes on larger FTX claims have also seen an uptick this year, as indicated by Claims Market’s charts. Debt investors have been accumulating FTX claims, speculating that the company’s bankruptcy proceedings will yield greater value by the time they are resolved. However, it’s important to note that major bankruptcies can take years to unwind, especially in the crypto space, making it challenging to estimate the worth of a collapsed company.

Some bankruptcy claim investors believe that the total value of traded FTX claims may surpass the $250 million recorded in public court documents. Thomas Braziel, a bankruptcy claims investor, suggested that buyers and sellers sometimes wait months to file the necessary paperwork for debt trades. He mentioned that he is aware of individual FTX claims exceeding $100 million and likened the situation to the ones seen with Lehman and Madoff, stating that people made careers off of Lehman and Madoff, and they see FTX as a Lehman or Madoff. The ones who are buying in these dockets are some of the smartest people in distress, according to him.

Additionally, many investors have been acquiring rights to FTX crypto accounts that hold assets stranded on the platform following FTX’s suspension of withdrawals in November 2022. Contrarian Capital Management, a debt investment firm, reportedly acquired an FTX account holding a substantial amount of Bitcoin and ether, along with $430,000 in cash.

It’s worth noting that some crypto-related bankruptcies can drag on for years, as seen in the case of Mt. Gox, a major crypto exchange that suffered a hack in 2014. Mt. Gox recently extended the deadline for returning Bitcoin holdings to investors by another year. As of now, Bitcoin has surged by over 3,000% since Mt. Gox restricted user withdrawals following the hack.

This development coincides with executives overseeing the restructuring of FTX urging investors to complete the claims process via the FTX Customer Claims Portal by the September 29, 2023 deadline.

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