Wall St. Brokers want to buy rights to assets locked on FTX

Wall Street brokers are circling the ruins of FTX, offering to pay the crypto exchange’s clients pennies on the dollar for the bankruptcy rights to their locked cash and cryptocurrency on the platform, before attempting to sell those rights to specialist hedge funds for sale. Investment bank Jefferies and brokers Seaport Global and BTIG are among a number of Wall Street firms trying to estimate the potential value of the trapped assets, according to people – two for each firm – with direct knowledge of their plans.

Given the complexity of the bankruptcy process, it could take FTX’s clients years to recover their funds and they will likely only get a small fraction of their deposit. So financial firms are competing to buy customers’ claims on those assets now at a discount and then profit when some of the funds are eventually handed over. This practice is common in bankruptcies and allows investors to get some of their money back sooner by giving away the rights to specialized companies willing to litigate for profit. However, given the uncertainty surrounding the bankruptcy process and whether any of the FTX funds will be available, the usual price for the claims is pennies on the dollar. Seaport declined to comment. Representatives from Jefferies and BTIG did not immediately respond to requests for comment. After the collapse of FTX, some trading has taken place on Claims Market, an online bankruptcy claims marketplace run by Vladimir Jelisavcic at Cherokee Acquisition, a financial firm specializing in bankruptcy. “We buy claims” Mr Jelisavcic wrote on Twitter on Friday: Offer to buy receivables at 6 cents on the dollar and sell at 10 cents. Some specialist investors who had been offered the opportunity to buy claims said they were still working on the analysis needed to understand if the trade was likely to be profitable. One issue, they said, is whether assets that customers had withdrawn from the exchange in the days and weeks leading up to FTX’s bankruptcy filing could be recovered in the court cases, leaving those customers with no benefit. FTX filed for bankruptcy last Friday after a deposit rush left the company with an $8 billion hole in its accounts. This has put FTX clients in a precarious position, with billions of dollars worth of assets trapped on the platform. Before its sudden collapse, FTX was considered one of the most reliable companies in the free-running, loosely regulated crypto industry. It ran extensive marketing campaigns that encouraged amateur investors to start buying cryptocurrency. Now its implosion has effectively wiped out those people’s savings. The bankruptcy is the largest of several financial meltdowns in what has been a sobering year for the crypto industry. Following a market crash this spring, two crypto lending companies, Celsius Network and Voyager Digital, filed for bankruptcy, sparking months of legal maneuvering over how their assets should be divided. Shortly before filing for bankruptcy itself, FTX won an auction to buy Voyager’s remaining assets.

https://ustoday.news/wall-st-brokers-want-to-buy-rights-to-assets-locked-on-ftx/