Rising Market Trend for FTX Creditors Claims as Bankrupt Exchange Recovers
Summary:
Rising demand for FTX creditor claims sees some selling for more than half the dollar value, revealing a firming market, says Thomas Braziel from 117 Partners. Increasing valuation of these claims follows recent recovery efforts by the bankrupt crypto exchange, FTX, and capital-raising efforts by Anthropic, a company FTX previously invested in. Despite the market surge, Braziel highlights some persisting issues that need addressing. The estimate of claims, however, shows promise for creditors, with an agreement from an Ad hoc committee of non-US FTX customers marking a significant win for firms aiming to sell their claims. The new CEO, John Ray III, continues to regain the lost assets through various interventions.
Increasing demand for FTX creditor claims is observed in the market, with claims selling at more than half of their original price, as reported by Thomas Braziel from 117 Partners, a firm with expertise in cryptocurrency insolvency claims. Braziel shared with Cointelegraph that a claim worth in excess of $20 million had recently fetched between 52 and 53 cents in an Oct 20 auction. However, he pointed out that only superior claims usually reach these high prices and said "Small claims ranging from $500K to $800K and above have seen market surge." "These claims are currently being traded between upper 30 cents and lower 40 cents range," though he mentioned these prices are generally received for the best claims from the right buyer.
Rise in the value of creditor claims seems to be in line with the recent attempts of recovering assets by the bankrupt crypto exchange, along with capital accumulation efforts by a company in which it formerly invested. During April 2022, Anthropic accumulated $580 million in a Series B fundraiser headed by Sam Bankman-Fried, the ex-CEO of the now-collapsed FTX. Amazon declared a $4 billion investment in Anthropic on September 25. Anthropic seeks to raise funds at a possible $30 billion estimate, turning FTX's investment in the firm somewhere within $3.5 billion and $4 billion. As reported by an October 4 update from the FTX creditor coalition, the valuation could enable full recovery for FTX creditors. As an outcome, FTX clients could be fully recompensed.
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While excitement over FTX claims is increasing, Braziel pointed out that there are still some issues that need to be addressed, but overall, the increasing estimate of claims is promising news for creditors. "There are still numerous details to be worked out. Problems regarding KYC and AML keep showing up," explained Braziel. He further stated that the successful settlement and plan support announced by the Ad hoc Committee of non-US FTX customers on October 18 was a substantial achievement for several firms intending to sell their claims. The modified support plan entails the "shortfall claim" which comprises creditors estimate that FTX.com and FTX US would be collectively compensated 90% of distributable assets. The shortfall claim is approximated at nearly $8.9 billion for FTX.com and $166 million for FTX.US. "These companies had a difficult time selling their claims as treatment of clients clawbacks were yet uncertain" Braziel mentioned. "The scheduled support agreement and rough framework are beneficial for trading entities to sell their claims."
Since the initial filing by FTX for a Chapter 11 Bankruptcy protection on Nov 11, 2022, the FTX Debtors' estate, under the leadership of the new CEO, John Ray III, has taken numerous initiatives to recover lost assets, including selling FTX holdings and substantial clawbacks from other digital currency businesses and ex-FTX seigniorage.
Related: Chainalysis born out of investigation into Mt. Gox collapse.
Published At
10/23/2023 2:32:49 AM
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