- FTX customers are selling their bankruptcy claims at steep discounts, according to reports.
- Customers holding a total of $1 billion in credit claims expressed interest in selling through bankruptcy claims buyer Cherokee Acquisition.
- Cherokee’s online marketplace pays 8 to 12 cents on every dollar of FTX deposit claims.
FTX customers whose funds are stuck on the embattled crypto exchange are selling their credit claims at steep discounts amid an uncertain and potentially lengthy bankruptcy process.
Customers holding roughly $1 billion in credit claims have expressed interest in selling their claims through Cherokee Acquisition, an investment banking firm and claims buyer, according to the Wall Street Journal.
Elsewhere, bankruptcy claims trading platform Xclaim has listed nearly $92 million in FTX user claims after pivoting its business to focus on crypto-related claims.
With FTX’s liabilities topping its assets by billions of dollars, many customers will only recover a fraction of their total holdings from the exchange. Rather than waiting for a drawn-out bankruptcy process to play out, some are choosing to get some money now.
So FTX users are selling their claims for pennies on the dollar. Cherokee Acquisition’s online marketplace pays 8 to 12 cents on every dollar of FTX deposit claims, according to a November report. The pricing guides for these, however, can change daily.
FTX and more than 130 of its affiliates filed for bankruptcy protection last month after the cryptocurrency exchange experienced a “run on the bank,” resulting in an $8 billion loss of customer money. The once $32 billion crypto empire’s disgraced founder, Sam Bankman-Fried, has been charged with several counts of fraud.
It’s unclear how much creditors may get back because FTX did not have reliable financial information and the company’s former executives are being subject to criminal investigations.
New FTX CEO John Ray, a restructuring expert who oversaw Enron’s bankruptcy process, said that the firm had an extreme lack of oversight of its financial controls.
“FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” Ray said, while appearing before the House Financial Services Committee on December 13.