The market for bankruptcy claims is witnessing a surge in interest in the debt of the collapsed cryptocurrency exchange FTX, with significant credit investors rushing to acquire this debt.
According to an internal analysis of public court documents, investors like Silver Point Capital, Diameter Capital Partners, and Attestor Capital have already purchased over $250 million worth of FTX debt in 2023, as reported by Bloomberg on September 21.
FTX's debt has also garnered attention from investors such as Hudson Bay Capital Management, which acquired $23 million worth of FTX debt and later sold approximately 50% of it to Diameter.
Prices for some FTX claims have been soaring this year as demand surges. According to the cryptocurrency debt broker claims market, some lower-ranked FTX claims have seen a substantial 191% increase, rising from $0.12 in early 2023 to about $0.35 in recent weeks. Historical data on "bid" and "ask" prices for larger FTX claims has also shown an increase throughout the year.
Investors in debt are accumulating FTX claims, anticipating that the company's bankruptcy proceedings will unlock additional value once resolved. However, it's important to note that major bankruptcies can take years to resolve, and determining the value of a failed company, especially in the cryptocurrency sector , is complex.
Some bankruptcy claims investors suggest that the total value of FTX's claims across all transactions could surpass the $250 million reported in public court records. Thomas Braziel, a bankruptcy claims investor, mentioned that the process can be lengthy, with buyers and sellers sometimes waiting months to submit documents for debt transactions. He claimed knowledge of individual FTX claims exceeding $100 million.
This surge in interest in FTX's debt parallels similar situations seen in the past with high-profile bankruptcies, such as Lehman Brothers and Bernie Madoff. Many investors view FTX as a significant case, given the unique challenges posed by a cryptocurrency exchange's insolvency.
The bankruptcy claims market remains active as FTX's restructuring executives emphasize the importance of completing the claims process via the FTX Customer Claims Portal before the upcoming September 29, 2023 deadline.
