Xclaim Reports, A $5 Billion Haul From FTX Fails To Boost Bankruptcy Claims
One may anticipate that the price of any bankruptcy claims would increase after the liquidators of the defunct cryptocurrency exchange FTX disclosed this week that they had discovered $5 billion in assets.
According to Matt Sedigh, creator and CEO of Xclaim, a marketplace for buying and selling bankruptcy claims, they hardly moved at all.
“[It] had very minimal impact on our marketplace, where you would think that if you find $5 billion, it certainly enhances the value. It didn’t by much, it increased prices by about a penny,” Sedigh said.
FTX claims, which are those that have all the necessary supporting documents, are now selling on the Xclaim marketplace for as much as 15.5 cents on the dollar for immaculate claims. The price of other claims often trades 2% to 3% lower.
About 13.5 cents on the dollar were being paid for FTX claims the previous week. The pricing is fluid and frequently changes in response to how fast the market expects the bankruptcy procedures to be finished.
Cryptocurrency bankruptcy claims
A very scarce asset class is bankruptcy claims. To assist in resolving this issue, Sedigh created the market, allowing claims to swiftly cash out by selling to a third party as opposed to delaying the conclusion of a protracted bankruptcy procedure.
For the four cryptocurrency bankruptcy cases Celsius, FTX, BlockFi, and Voyager, Xclaim now provides bidding on claims. For clean claims, they are now selling at up to 18.5 cents, 15.5 cents, 32.5 cents, and 41 cents on the dollar, respectively.
According to Sedigh, two factors often determine their prices.
First, divide the value of the underlying assets by the total number of creditors who are anticipated to be paid. Second, the claims’ timeframe, according to Sedigh.
FTX faces a challenging future
The Bernie Madoff case, which had a protracted bankruptcy procedure, may be the greatest example to compare to FTX.
After admitting to orchestrating a multibillion-dollar Ponzi scam that cost many investors their life savings, Madoff was given a 150-year jail term. Even though the bankruptcy case was filed in 2008, creditors are still getting paid.
“Any FTX customer who’s looking for cash, or expecting cash in the next two years, I would feel very strongly saying that they’re unlikely to see that,” Sedigh said. “Prices will go up if they find more assets, or if they gain more certainty. Prices will go down if those assets are worthless and litigation would extend the timeline.”
Who wants to buy troubled assets?
Even yet, there is still a desire to purchase claims. Since claims trading is an unregulated sector, Sedigh said that Xclaim has doubled the number of buyers it has by enabling anybody to file “buy” claims.
Numerous clients on the buy-side are also cryptocurrency traders, therefore representing the bull side of the market. Since holders’ contact information is now private, finding claim dealers may be more difficult.
“The way we’ve been engaging with them is it is actually marketing for us when we accomplish a trade,” Sedigh said.
“Every single trade needs to be recorded with the court, so every time a trade occurs, our name is popping up on the docket and people that are motivated to collect what they are owed will find opportunities, like ours, to cash out.”
According to Sedigh, the claims market is unregulated and the search for value in cryptocurrency claims has drawn both institutional players and private investors. Anyone who is still a cryptocurrency bull or bear is welcome to enter and trade.
Institutional investors, such as cryptocurrency hedge funds with external shareholders, or investors that wish to close out positions, balance the loss against taxes, and move on are often the sellers of claims.
The Block revealed last month that Singapore-based cryptocurrency dealer QCP Capital has at least $97 million with FTX and has been attempting to sell its claim. Multicoin Capital, Genesis Block HK, Nickel Digital Asset Management, and Galois Capital are further companies that are known to have assets on FTX. After operating for over ten years, Genesis Block HK decided to cease its over-the-counter trading activity in December due to the effect.
According to Sedigh, since July, XClaim has lodged over 200 claims totaling $152 million throughout the four bankruptcy cases.
“We have registered many more buyers, particularly because of FTX, because they believe there’s an opportunity there, but the trading hasn’t been as fast as the other cases, at least not to date,” Sedigh said.
