Distressed debt investors are reportedly gobbling up hundreds of millions of dollars in claims from bankrupt crypto exchange FTX.
According to a new Bloomberg reportAn analysis of their data shows that investment firms such as Silver Point Capital, Diameter Capital Partners, Attestor Capital, Hudson Bay Capital Management and others have purchased $250 million of FTX debt since early 2023.
Bloomberg says investors operate in an unregulated bankruptcy claims market, where debt contracts can be purchased for a fraction of what is owed.
Thomas Braziel, a bankruptcy claims investor, tells Bloomberg that the FTX situation is similar to Bernie Madoff’s investment scandal.
As Braziel told Bloomberg:
“People have made careers at Lehman and Madoff. I think people see FTX as a Lehman or Madoff. I consider the guys who buy these files to be some of the smartest people in need.’
The report shows that FTX debt has traded at $0.35 per dollar in recent weeks, compared to $0.12 per dollar from the beginning of the year. Bloomberg says that in many cases, investors are buying rights to accounts with assets tied up in the crypto exchange.
Some notable corporate purchases include Hudson Bay Capital Management buying a $23 million claim from a fortune cookie distributor and then selling half of it to Diameter Capital Partners soon after, and Contrarian Capital Management in May buying an account that offered crypto assets was owed, including Bitcoin (BTC). ) and Ethereum (ETH) and $430,000 in cash.
In another purchase, Attestor Capital bought a $17 million claim from Miami-Dade County related to the naming rights FTX once had to the city’s NBA arena, the report said.
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Featured image: Shutterstock/Larissa Kulik