Investment Funds Compete to Secure FTX Debt Claims

In a surprising turn of events, investors such as Silver Point Capital, Diameter Capital Partners, and Attestor Capital have acquired over $250 million worth of FTX debt in 2023, based on court document analysis. This move underscores the growing interest in the cryptocurrency exchange’s debt obligations, a phenomenon that has also lured in players like Hudson Bay Capital Management. It is reported that they acquired FTX debt claims valued at $23 million and subsequently sold approximately 50% to Diameter.

In response to increasing demand, the prices of FTX debt claims have seen a meteoric rise this year. Some lower-rated FTX debt claims have surged by 191%, from $0.12 at the beginning of 2023 to around $0.35 in recent weeks, according to reports citing data from the Claims Market, an electronic claims brokerage platform.

The Claims Market chart also illustrates that the “bid” and “ask” prices for significant FTX debt claims have surged this year. This suggests that debt investors have been accumulating FTX Group debt claims, speculating that the exchange will ultimately pay out significantly more than the cost of acquiring these claims. Nevertheless, the risk lies in the fact that large bankruptcy cases can take years to resolve, and determining the value of a collapsed company, especially in the cryptocurrency sector, can be extremely challenging.

In addition to acquiring debt claims, many investors are going a step further by purchasing ownership rights to FTX accounts containing frozen assets. Contrarian Capital Management is believed to have acquired an FTX account holding a substantial amount of Bitcoin (BTC) and Ether (ETH), along with $430,000 in cash.

This news comes in the context of creditors having just one week left to submit debt claims to FTX.

Some cryptocurrency bankruptcy cases have taken several years to resolve. Mt. Gox, a major cryptocurrency exchange that was hacked in 2014, recently extended the deadline for returning Bitcoin to investors by another year. As of the current moment, Bitcoin has appreciated by over 3,000% since Mt. Gox suspended cryptocurrency withdrawals following the hack.

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