Prices for claims against the cryptocurrency exchange FTX are on the rise, as a crucial preliminary court hearing approaches on January 25. This uptick in prices, observed by Cherokee Acquisition, a firm specializing in bankruptcy claims, is driven by creditors' hopes for a ruling that favors repayment in the actual cryptocurrencies lost, rather than their cash value. FTX claims are currently trading at about 80 cents on the dollar, indicating a positive shift in creditor sentiment.
FTX has proposed repaying creditors based on the value of the cryptocurrencies at the time of its bankruptcy declaration. However, many creditors are advocating for an “in-kind” repayment approach, which would consider the number of cryptocurrency tokens lost, rather than their fluctuating market value. This method aims to ensure creditors receive the specific cryptocurrencies they had invested in.
The rise in the value of FTX claims, some exceeding $3 million and up to an 80% increase, reflects a growing confidence among creditors about receiving substantial repayments. This optimism is a significant jump from November 2022, when claim prices reached 57%, partly due to FTX's investments in AI companies. The increase in claim values is notable, especially when compared to the claim price increases of other bankrupt cryptocurrency firms like Alameda Research, Genesis Global, and Three Arrows Capital.
FTX's bankruptcy has affected approximately 1 million creditors, all seeking to recover their funds. The company's court filings show that the top 50 creditors are owed a combined $3.1 billion, with the largest single creditor claiming $226 million. These numbers highlight the extensive financial impact of FTX's collapse.
To manage their financial obligations, the estates of FTX and Alameda Research have sold more than two-thirds of their shares in the Grayscale Bitcoin Trust, raising at least $600 million. Before its conversion to a spot exchange-traded fund on January 11, the FTX Trust owned 22.28 million shares of the Grayscale Bitcoin Trust, valued at $902 million. This liquidation strategy is part of FTX and Alameda Research's efforts to address the numerous claims from their creditors.
