Distressed debt investors are reportedly gobbling up hundreds of millions of dollars worth of bankrupt crypto exchange FTX’s claims.
According to a new Bloomberg report, an analysis of their records indicates that investment firms such as Silver Point Capital, Diameter Capital Partners, Attestor Capital, Hudson Bay Capital Management and others have bought $250 million worth of FTX debts since the start of 2023.
Bloomberg says that investors are operating 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 the Bernie Madoff investment scandal.
As stated by Braziel to Bloomberg,
“People made careers off of Lehman and Madoff – I think people see FTX as a Lehman or Madoff. The guys that are buying in these dockets, I consider them some of the smartest people in distress.”
The report finds that during the last few weeks, FTX debts have been quoted at $0.35 on the dollar, up from $0.12 on the dollar from the start of the year. Bloomberg says that investors in many cases are purchasing rights to accounts with assets stuck on the crypto exchange.
Some notable purchases made by firms 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 shortly thereafter and Contrarian Capital Management in May purchasing an account that owed crypto assets including Bitcoin (BTC) and Ethereum (ETH) and $430,000 worth of cash.
Another purchase saw Attestor Capital buy a $17 million claim from Miami-Dade County connected to the naming rights FTX once had with the city’s NBA arena, according to the report.
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