Navigating The Aftermath Of FTX: A Market For Bankruptcy Claims Emerges

✍️ 20 December, 2023 - 14:54 👤 Editor: Jakub Motyka

• Discover the burgeoning market of trading FTX's bankruptcy claims, where investors are betting on the recovery of funds supposedly misappropriated by Sam Bankman-Fried.
• Investors are betting big on these bankruptcy claims, hoping that the payments made by the bankruptcy estate will exceed the discounted purchase price of the claims.
• The latest news about cryptos on our Telegram channel.

In the wake of FTX's dramatic bankruptcy, a unique market has emerged, focusing on the trading of the company's bankruptcy claims.

Investors and firms are betting on the recovery potential of the collapsed cryptocurrency exchange, creating a bustling market that reflects both the risks and opportunities in the aftermath of one of the most significant collapses in the crypto industry.

The Rise of a New Market After The Bankruptcy Of FTX

Thomas Braziel, a partner at the investment firm 117 Partners, has been at the forefront of this emerging market as we have read on this fantastic piece from The New York Times.

Braziel has been brokering sales of FTX bankruptcy claims, essentially i.o.u.s from the defunct exchange. The market started with sales at relatively low prices: one of Braziel's clients sold a claim worth nearly $100 million for just 6 cents on the dollar.

However, the market rapidly heated up, with some claims now selling for more than 70 cents on the dollar. This surge in prices reflects growing optimism that FTX's new leadership could recover a significant portion of the funds supposedly misappropriated by founder Sam Bankman-Fried.

Nothing New In The World Of Bankruptcys

Claims trading, while not new in the world of bankruptcy, has gained particular prominence in the fallout of FTX's collapse. The idea is straightforward: creditors with locked funds in FTX can sell their claims for immediate cash, albeit at a fraction of their face value.

Buyers, on the other hand, speculate that the bankruptcy proceedings will recover more than the discounted price they paid for these claims. This form of trading offers a quick exit for some creditors, who might otherwise have to wait years for a resolution, while providing an opportunity for others to potentially profit from the bankruptcy process.

As the FTX bankruptcy proceedings continue, the claims market is expected to remain active. The outcome of these proceedings, including the total recovery for creditors, is still uncertain. Factors like legal fees and potential tax claims from the IRS could significantly impact the final payouts. Despite these uncertainties, the market remains a hive of activity, with investors and creditors alike navigating the complex landscape of a high-profile crypto bankruptcy.

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