Bull Trend in Bankruptcy Claims Market Amid Rush to Buy Debts of Defunct Crypto Exchange FTX
Summary:
Major credit investors have been rushing to purchase debts of the defunct cryptocurrency exchange, FTX. The bankruptcy claims market has seen firms like Silver Point Capital, Diameter Capital Partners, and Attestor Capital collectively acquire over $250 million worth of FTX debts in 2023. The growing demand has caused the price of some FTX claims to soar. Meanwhile, some investors have been buying rights to FTX crypto accounts with their assets still frozen in the platform since November 2022.
The market for bankruptcy claims is demonstrating a positive trend regarding the debts of the defunct crypto exchange FTX, with prominent credit investors actively purchasing FTX debts. Firms such as Silver Point Capital, Diameter Capital Partners, and Attestor Capital have acquired in excess of $250 million in FTX debts in 2023 alone, as per a Bloomberg report dated Sept. 21 that relied on an internal analysis of publicly accessible court records.
Among the buyers of FTX debt is Hudson Bay Capital Management, known for acquiring a $23 million FTX claim, half of which it eventually sold to Diameter. The escalating demand is driving a sharp increase in the price of certain FTX claims this year. For instance, the comparatively less significant FTX claims experienced a 191% growth, escalating from $0.12 in the early part of 2023 to around $0.35 in the most recent weeks, as reported from data supplied by the crypto debt broker Claims Market.
The historical bid and ask prices for the higher-ranking FTX claims also showed an upward trend this year, as exhibited in the charts from Claims Market.
FTX Group claims are experiencing an increasing accumulation by debt investors, who are wagering that the resolution of the firm’s bankruptcy proceedings would result in augmented value. Yet, major bankruptcies can sometimes span across several years before final resolution, and forecasting the value of a failed company could be a daunting task, particularly for firms dealing in cryptocurrency.
As per certain bankruptcy claim investors, the overall trade value of all FTX claims could potentially surpass the $250 million worth of transactions visible in public court documents. Thomas Braziel, a bankruptcy claims investor, implied that the filing of the paperwork for a debt trade sometimes can take several months, during which time he has reported knowledge of individual FTX claims exceeding $100 million.
Braziel's observations in the report were, “The cases of Lehman and Madoff catapulted individuals into lucrative careers — FTX is viewed in a similar light. Those procuring from these docket sales, I regard as some of the most astute individuals in the field of distressed assets.”
The report also indicates that several investors have procured the rights to FTX crypto accounts, which have assets frozen post the suspension of all withdrawals by FTX in November 2022. Contrarian Capital Management, a debt investment firm, reportedly bought an FTX account holding considerable Bitcoin (BTC) and Ether (ETH), along with a cash component of $430,000.
In some instances, settlement of crypto bankruptcies has spanned across years. For example, Mt. Gox, a formerly prominent crypto exchange that succumbed to a hacking incident in 2014, has yet again pushed back the deadline for the restitution of Bitcoin holdings to its investors by another year. The valuation of Bitcoin has witnessed a more than 3,000% surge since Mt. Gox blocked withdrawals of crypto following the hack.
In related news, FTX restructuring executives urge investors to finalize the claims process via the FTX Customer Claims Portal, adhering to the Sept. 29, 2023, cut-off date.
Magazine: Asia Express: PEX staff desert event as scandal unfolds, Mt. Gox predicaments continue, Diners Club ventures into crypto.
Published At
9/22/2023 9:31:25 AM
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