The market for bankruptcy claims has displayed a robust appetite for the debts of the defunct cryptocurrency exchange, FTX, with major credit investors rushing to acquire FTX debts.
As reported by Bloomberg on September 21, 2023, investors such as Silver Point Capital, Diameter Capital Partners, and Attestor Capital have collectively purchased over $250 million worth of FTX debts this year, based on an in-house analysis of public court filings.
Notably, FTX’s debt has attracted interest from investors like Hudson Bay Capital Management, which acquired a $23 million FTX claim and subsequently sold approximately 50% of it to Diameter.
This growing demand has led to a surge in the prices of some FTX claims throughout the year. Certain lower-ranking FTX claims have seen a remarkable 191% increase, climbing from $0.12 in early 2023 to approximately $0.35 in recent weeks, according to data from the crypto debt broker Claims Market.
The historical indicative prices of “bid” and “ask” for larger FTX claims have also experienced an upward trend this year, as reported by Claims Market’s charts.
Investors are accumulating FTX claims with the expectation that the firm’s bankruptcy proceedings will unlock additional value when resolved.
However, it’s worth noting that major bankruptcies can take years to unravel, making it challenging to assess the final worth of a collapsed company, especially in the volatile world of cryptocurrency.
Some bankruptcy claim investors believe that the total value of all traded FTX claims may exceed the $250 million reported in public court records.
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Thomas Braziel, a bankruptcy claims investor, suggested that buyers and sellers often delay filing paperwork for debt trades.
He mentioned being aware of individual FTX claims surpassing $100 million, likening FTX to historical financial collapses like Lehman and Madoff.
In addition to debt claims, many investors are acquiring the rights to FTX crypto accounts that still hold assets trapped on the platform since FTX suspended withdrawals in November 2022.
Debt investment firm Contrarian Capital Management, for instance, acquired an FTX account containing a substantial amount of Bitcoin and Ether, alongside $430,000 in cash.
The phenomenon of protracted crypto bankruptcies is not unique to FTX; for instance, Mt. Gox, a major crypto exchange hacked in 2014, has once again extended the deadline for returning Bitcoin holdings to investors by another year. At the time of writing,
Bitcoin’s value has surged over 3,000% since the Mt. Gox hack, underlining the long-lasting repercussions of such incidents.
The backdrop of these developments is FTX’s ongoing restructuring efforts, with executives urging investors to complete the claims process via the FTX Customer Claims Portal by the September 29, 2023 deadline.
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