Former FTX customers, left uncertain of the fate of their funds after the collapse of the now-bankrupt crypto exchange, have turned their misfortune into a potentially profitable venture.
Led by individuals such as Louis d’Origny and Ramnik Arora, FTX’s former head of product, this group has seized the opportunity to invest in FTX bankruptcy claims. Their FTX Creditor platform facilitates the acquisition of millions of dollars worth of claims.
FTX Collapse Spurs Lucrative Investment
According to a Bloomberg report, following FTX’s implosion, d’Origny recognized the potential investment opportunity and became one of the first to purchase FTX bankruptcy claims from fellow customers facing a similar predicament.
Capitalizing on this early move, d’Origny established four investment funds and acquired approximately $31 million claims. Additionally, through the FTX Creditor platform, d’Origny and his partner Arora facilitated the purchase of an additional $60 million in claims.
FTX Creditor primarily targets bankruptcy claimants who held less than $100,000 on the exchange. d’Origny expressed his intention to create a “transparent and efficient” process for these creditors to alleviate the risks and alleged lack of transparency that “plagued” the market.
According to the report, when d’Origny and his team first began buying claims, they estimated that creditors would recover about 25 to 30 cents on the dollar. The average cost of claims purchased through their third fund was 15 cents on the dollar owed.
Their strategy was based on the assumption that significant clawbacks would occur, resulting in significant recoveries. However, uncertainties surrounding claim pricing and new bankruptcy developments have added complexity to the process.
Cryptocurrency Prices Surge Creates New Dynamics
Throughout the purchasing process, d’Origny and his team encountered various challenges. In one instance, while negotiating the purchase of a $4 million claim with a customer, they learned that the US Internal Revenue Service had filed bankruptcy claims worth billions of dollars against FTX. Despite the uncertainty, they proceeded with the purchase, albeit at a discount of 25 cents on the dollar.
As cryptocurrency prices experienced a significant surge, some FTX customers expressed concerns about the current plan to peg the value of their holdings to digital asset prices from November 2022.
However, d’Origny highlighted the satisfaction of the claimants he works with, as his platform processes purchases, often within 30 minutes. According to the report, many claimants are even eager to reinvest the funds they receive back into the cryptocurrency market.
While the exchange has assured a bankruptcy judge that creditors who can prove their losses will likely recover their entire investments, the rise in cryptocurrency prices presents a new dimension.
As challenges persist, the relief experienced by claimants and their readiness to reinvest in the cryptocurrency market demonstrates the impact of FTX Creditor’s efforts.
As of this writing, FTT is trading at $1.989, reflecting a significant surge of 10% within the past 24 hours. However, when considering longer time frames, such as the previous two weeks, the token continues to exhibit losses exceeding 20%.
Featured image from Shutterstock, chart from TradingView.com