Creditors of the bankrupt cryptocurrency exchange FTX have utilized decentralized finance (DeFi) protocol Arcade to pledge their claims as collateral for loans. This marks the first on-chain loan backed by an FTX claim, as reported by bankruptcy claims platform Found. Tokenizing claims worth $31,307, non-fungible tokens (NFTs) were used to represent ownership. Subsequently, an NFT was used as collateral for a $7,500 loan, with repayment expected within five days. In the event of default, the lender retains the right to file a claim . This transaction showcases the tokenization of real-world assets (RWAs) on the blockchain, a prominent trend in DeFi encompassing various asset types like stocks, real estate, and commodities.
Found confirmed that the original creditors and lenders underwent biometric "know your customer" and anti-money laundering screenings. Through the platform, users can obtain loans by utilizing bankruptcy claims as collateral, with a 10 percent transaction fee applied to successful transactions. FTX, the cryptocurrency exchange that filed for bankruptcy in November 2022, locked substantial amounts of user funds pending court proceedings. FTX claim holders are estimated to receive between 35% and 66% of the face value of their claims.
The past year witnessed a surge in bankruptcy cases related to cryptocurrencies, including those stemming from the collapse of FTX. Genesis Global Trading and BlockFi were among the cryptocurrency companies involved in such cases. Consequently, the rise in bankrupt cyfilings has spurred the development of on -chain claims resolution mechanisms. Found, launched earlier this year, facilitates this process, while the co-founders of the defunct hedge fund Three Arrows Capital introduced Open Exchange, a debt trading platform, in April.
