FTX Creditor Claims Surge Past 50-Cent Mark, Spurring Hope Of Significant Recoveries

FTX creditor claims have unexpectedly increased in value, exceeding the 50-cent threshold in recent over-the-counter (OTC) transactions.

This rise in valuation signals the market’s unexpected confidence about the struggling cryptocurrency exchange’s bankruptcy procedures.

According to Thomas Braziel, a specialist in debt claims and a partner at 117 Partners, a claim worth more than $20 million fetched between 52 cents and 53 cents on the dollar during an auction held on October 20, says a CoinTelegraph report.

This is a 4 times increase on the claims price, given that the claims were selling for about 13 cents on the dollar earlier in the year. This was significantly low compared to the price of claims on other firms such as Celsius, BlockFi, and brokerage Voyager, which were trading around 18.5 cents, 28.5 cents, and 41 cents on the dollar.

While this is good news for FTX creditors, it is important to note that only the best claims, that is the “largest and cleanest claims” with the right buyer, are commanding such high values. On the other hand, smaller claims are still selling for quite lower prices on the dollar. 

Based on the rise, the crypto market currently seems to be hopeful with anticipations that almost half of the customers’ assets will be recovered. The optimism is, however, unexpected since the outcomes of a January poll conducted on X depicted that the majority of participants anticipated a mere 25% return on their claims. 

The creditor claims seem to have surged in value in response to recent attempts by the bankrupt cryptocurrency exchange to reclaim assets. Additionally, a company that FTX had previously invested in raised funds.

FTX, led by its former CEO Sam Bankman-Fried, led a Series B investment round where Anthropic raised $580 million in April 2022. In September this year, Amazon revealed that it would invest $4 billion in the AI startup. 

Anthropic is looking to raise its valuation to between $20 billion and $30 billion. This will subsequently raise the value of FTX’s investment in the company to between $3.5 billion and $4 billion. 

According to FTX, if this valuation were attained, it would be sufficient to see FTX creditors made whole.

https://twitter.com/AFTXcreditor/status/1709345555971707368

Braziel noted that while there were still certain Anti-Money Laundering and Know-Your-Customer issues that needed to be resolved, the general increase in claim worth was encouraging for creditors in light of the increased enthusiasm for FTX claims.

SBF Trial Breeds Doubt Over FTX

The claims and their recovery are however not in the clear as hurdles cast a shadow of doubt over them. First, is Bankman-Fried’s criminal trial, which is the source of significant uncertainty as to the future of FTX. 

The trial began earlier this month but the court is currently in recess and is set to resume on October 26. 

Additionally, unless the exchange’s investment valuation in Anthropic realizes the expected value, the company might not be able to fully compensate its creditors. As such, under the direction of CEO John Ray III, the FTX Debtors’ estate has been frantically trying to recover money by selling coins and liquidating other assets, among other strategies.

The estate has also been involved in efforts to recover money from other sources, but it is unclear how effective these will be at this point.

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