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FTX Creditor Claim Market Sees Spike in Value after Recent Developments

FTX creditor claim value rises, influenced by Anthropic's potential valuation and recent resolutions.

Tue, 24 Oct 2023, 10:20 am UTC

There's been a surge in the value of claims against FTX, a former cryptocurrency exchange. Recent reports indicate some of these claims are now selling for over half their initial value. Thomas Braziel, an expert at 117 Partners which deals in cryptocurrency bankruptcy issues, disclosed that top-tier claims are fetching these high prices. He cited the sale of a claim exceeding $20 million, which was auctioned for approximately 52 to 53 cents on the dollar on October 20.

However, Braziel was keen to highlight that only the most pristine claims can command such prices. He observed a firming up in the market for smaller claims, which range from just above $500,000 to $800,000 or more. These are trading between 30 and 40 cents, with only the highest quality ones selling at the upper range.

Several factors have contributed to the uptick in creditor claim values. Recent recovery actions by the liquidating crypto exchange have played a part. In addition, there's been interest in a firm called Anthropic, where FTX once invested. In April of 2022, Anthropic secured $580 million in a funding round. Interestingly, Sam Bankman-Fried, ex-CEO of the now nonexistent FTX, led this round. Later, on September 25, Amazon revealed an investment of $4 billion in Anthropic. This infusion of capital might push Anthropic's valuation to $30 billion, making FTX's stake worth a staggering $3.5 to $4 billion.

This development offers a ray of hope for FTX's creditors. A statement by the FTX creditor group on October 4 hinted that this valuation might be sufficient to reimburse FTX's creditors. Yet, Braziel warned of challenges that remain. Issues surrounding customer identity verification (KYC) and anti-money laundering (AML) protocols still need to be addressed.

Furthermore, Braziel underscored the significance of the recent resolution and the plan support declared by a committee representing international FTX clients on October 18. This has been a beacon for numerous institutions keen on offloading their claims.

The pivotal point of this revised support strategy is the "shortfall claim", where FTX's debtors project that and FTX US customers could get up to 90% of the assets that can be distributed. This shortfall claim is roughly valued at $8.9 billion for and $166 million for FTX US.

Braziel expressed that this arrangement benefits trading entities, allowing them to sell their claims more easily. Ever since FTX sought Chapter 11 bankruptcy protection on November 11, 2022, there's been a concerted effort led by the new CEO, John Ray III, to retrieve assets. This includes offloading FTX's assets and making significant recoveries from other cryptocurrency entities and ex-FTX minters.

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