Wall St. brokers seek to buy rights to trapped assets on FTX

Wall Street brokers circle the ruins of FTX, offering to pay the cryptocurrency exchange’s customers pennies on the dollar for bankruptcy rights to their trapped money and cryptocurrency on the platform, before to seek to sell these rights to specialized hedge funds.

Investment bank Jefferies and brokers Seaport Global and BTIG are among a number of Wall Street firms trying to assess the potential value of trapped assets, according to people – two from each firm – with knowledge directly from their plans.

Given the complex nature of the bankruptcy process, it could take years for any of FTX’s clients to get their funds back, and they are likely to receive only a small fraction of what they receive. he filed. Thus, financial firms compete to buy customer claims on these assets now at a discount, and then profit when some of the funds are eventually returned.

The practice is common in the event of bankruptcy, allowing investors to recover some of their money sooner by transferring the rights to specialized companies ready to fight a legal battle in search of profits.

Yet, given the uncertainty of the bankruptcy process and even if one of the FTX funds is available, the going price for claims is only pennies on the dollar.

Seaport declined to comment. Representatives for Jefferies and BTIG did not immediately respond to requests for comment.

Following the collapse of FTX, some transactions took place on Claims Market, an online marketplace for bankruptcy claims run by Vladimir Jelisavcic at Cherokee Acquisition, a bankruptcy-focused financial firm. “We buy claims” Mr. Jelisavcic wrote on Twitter on Friday, offering to buy claims at 6 cents on the dollar and sell them at 10 cents.

Some niche investors who had been offered the opportunity to buy claims said they were still working on the analysis needed to understand whether the trade was likely to be profitable.

One of the issues, they said, is whether the assets that clients withdrew from the exchange in the days and weeks before FTX filed for bankruptcy could be recovered as part of the legal proceedings in order to that these customers have no benefit.

FTX filed for bankruptcy last Friday, after a run on filings left the company with an $8 billion hole in its accounts. This put FTX clients in a precarious position, with billions of dollars in assets trapped on the platform.

Prior to its sudden collapse, FTX was considered one of the most trusted companies in the freewheeling and lightly regulated crypto industry. He has led extensive marketing campaigns encouraging amateur investors to start buying cryptocurrency.

Now its implosion has effectively wiped out those people’s savings. The bankruptcy is the biggest of several financial meltdowns in a trying year for the crypto industry. After a stock market crash this spring, two crypto credit companies, Celsius Network and Voyager Digital, filed for bankruptcy, triggering months of legal maneuvering over how their assets should be divided.

Shortly before declaring itself bankrupt, FTX won an auction to buy Voyager’s remaining assets.

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