The creditors of the FTX platform bankruptcy are somewhat confused. Not only does it seem that they will recover all the money, but in many cases they will multiply what they were owed or the investment made. Many of them are ‘vulture’ funds and debt specialists who bought at bargain prices the positions of clients desperate to get out of FTX in the face of its bankruptcy and the financial corralito it suffered. The platform founded by Sam Bankman-Fried (SBF) ended its days involved in large-scale fraud against its investors and accusations of money laundering and fraud.
However, the boom of Bitcoin and other cryptocurrencies since then reaches 250%. What were worthless remains are now valuable. Profits were increasing at a dizzying rate of 50%, 100% and almost 200%. Even for long-time bankruptcy veterans like Attestor Ltd., a London boutique firm specializing in trading distressed assets, this promised to be a memorable success but has turned into a new legal battle.
The operation, targeting the remains of SBF’s once-vast crypto empire, became popular in distressed investment circles last year. Many of Attestor’s rivals also joined in, and as the value of crypto currencies soared again, so did the value of the assets they had purchased at ridiculous prices from clients, desperate to get back some of what they could be. Bankruptcy lawyers now estimate that the liquidation will give investors 100% of the money frozen in FTX when it failed.
Legal battle…for 7,000 million
But this is where the story gets complicated for Atestor, and his grip on a piece of that profit becomes a little tenuous. The seller of one of the largest FTX accounts they bought, an obscure Panamanian company called Lemma Technologies controlled by a struggling South Korean trader, has chosen, so far at least, to keep the claim for itself.
Attestor’s lawyers have argued in a New York court that this is a clear case of “seller’s remorse.” Over the years, other bankruptcies have brought generous returns, but rarely, if ever, so quickly. In June, Lemma earned an asking price of $58 million, according to evidence presented to the court. Today, it is expected to pay 165 million. The atestor operation, in other words, was so good it could be bad.
The FTX bankruptcy is proving highly unusual for vulture funds and bankruptcy investors in another crucial way: They are purchasing debts on client accounts, a more complex and riskier transaction than the typical purchase of unpaid bonds or loans, debts that generally They are supported by clear legal documentation. Lemma has not yet publicly explained his side of the case and has not filed a defense against Attestor’s lawsuit.
Lemma “will not proceed with transactions or otherwise honor trade confirmations,” attestor’s attorneys said in their filing, “unless required to do so by law.” The fact that Lemma’s main investor, Junho Bang, is facing charges in a separate matter in Seoul only adds further confusion and makes the case more intriguing. He is accused of theft of digital assets owned by South Korea-based Haru Invest in February, but has no connection to Attestor’s lawsuit. Despite being separate lawsuits, these two cases point to a potentially problematic individual involved in two separate cases of cryptocurrency fraud.
While initial estimates at the end of 2022 indicated that claims would only see clients recover a few cents on the dollar, at a recent legal hearing, an FTX attorney told a bankruptcy judge in early March that the firm was in Way to repay creditors in full. The report cites a US Chapter 11 bankruptcy court court document filed earlier this year that reveals distressed debt specialist Attestor as the holder of the largest position in FTX claims with around $394 million at the end. . January, while other creditors include Baupost Group, Farallon Capital and Oaktree Capital, according to the document and people familiar with the matter cited by Bloomberg.
The success of FTX advisors in tracking billions of dollars of the company’s assets, coupled with a huge increase in the value of cryptocurrencies, and in particular Bitcoin, which now sits at around $69,000, versus to 16,000 in November 2022, means there are now nearly $7 billion in assets in FTX’s bankruptcy, with the company still in the process of selling assets. FTX also reportedly owns a stake in an artificial intelligence company that could be worth up to an additional $1 billion.
