FTX Claims Might Set Hedge Funds On Prosperous Path, But There’s a Twist

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Buyers of FTX creditors claim face a hurdle in converting their holding to dollars in the long run. At the same time, there is a possibility that it could turn many into millionaires if it pulls through.

FTX Claims’ Worth Jumps to 118% Higher

According to an updated repayment plan filing from the company, FTX claimed to have amassed as much as $16.3 billion to distribute to affected creditors. This repayment is designated for later in the year once its bankruptcy process ends. It is worth noting that a significant percentage of these funds came from the frequent sell-off of FTX Solana holdings.

In the filing, the distressed cryptocurrency exchange stated that small creditors could receive payouts exceeding their initial claims by up to 118%. Others were promised payouts as high as 142% in relation to their claims. Recall that FTX owes its non-governmental creditors and its customers up to $11 billion, therefore, its current holding may cover for its debt. Equity holders are not considered in the repayment plan.

Right after FTX imploded in November 2022, several entities began to purchase customers claims from the bankrupt cryptocurrency exchange. Some of the customers’ claim buyers are Diameter, Farallon, Attestor, and Oaktree. The claims were selling for as little as 3% of their face value then but with FTX’s promise to repay way above customers’ claims, these claims have just gone up from 118% to 142%.

FTX Claims Seller Refuse to Hand Over

With the new development, these entities are in for overwhelming profit but it could get complicated along the line, especially with a lack of appropriate paperwork. Attestor, one of the claim buyers that is trying to enforce FTX customers’ claim which it acquired from a trader in Korea, is facing difficulties with the seller.

Seeing that the market price of the claims suddenly hit new levels, the Korean trader has refused to fulfill his contractual obligation of handing over the claims to the Attestor. Olympus Peak is also facing the same challenge as some of its sellers have equally refused to hand over the claims.

FTX customers claim buyers are likely to face more problems beyond ‘sellers refusing to hand over’. Reputable buyers who acquired their claims from dubious sellers, especially those who failed to meet up with Know-Your-Customer (KYC) requirements, may not receive their payouts.

However, the tradeoff offers a massive risk-reward ratio many are betting on.

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