Crypto Customers Sell Claims at A Loss

Crypto Customers Sell Claims at A Loss

It Appears Bankruptcy Takes More Time than People Can Deal With

Some crypto customers now take a major loss on their holdings to escape the uncertainties of drawn-out bankruptcies, even if their accounts are trapped in failing cryptocurrency enterprises.

The FTX, Celsius Network LLC, and Voyager Digital Ltd collapses have burned hundreds of people. They want to sell their crypto tokens at a significant loss. Hopefully, when the platforms go through chapter 11, they will instantly know what they may recover.

Cherokee Acquisition is a bankruptcy claims broker and buyer. According to the firm,  crypto customers and other creditors owning around $1B in FTX claims and roughly $100M in Celsius claims have shown interest in selling them via an online auction.

Xclaim Inc., a bankruptcy claims trading firm, recently switched its operations to focus on offering a platform for crypto claim buying and selling. Over 500 FTX, Celsius, and Voyager users have reported claims worth about $126M for sale. According to Xclaim, the FTX customer claims total about $91.7M.

These investors take the loss upfront to avoid going through bankruptcy proceedings that might not guarantee a better outcome or that they don’t have time to explore.

Opportunism Is Blooming in The Intersection Between Cryptocurrency and Chapter 11

On the other hand, hedge funds and distressed-debt investors are making calculated bets on the other side of the transactions. Court papers show that fund managers such as Celsius or Voyager creditors, Contrarian Capital Management LLC, Invictus Global Management, and NovaWulf Digital Management have acquired claims from them.

Professional asset managers claim to be purchasing tokens that they believe have significant upside. Fortunately, they have the money and the time to ride out the bankruptcy. In addition, if they aren’t repaid in dollars through bankruptcy, they will look at the quality of the tokens they purchase.

Claims may be priced differently daily. After FTX collapsed in early November, the deal to purchase Voyager fell through. Additionally, Voyager’s bankruptcy claims dropped to 40 cents on the dollar. They had previously traded at 64 cents a share. Shortly after FTX filed for bankruptcy, Celsius’s claims fell from highs of roughly 29 cents to 19 cents.

Only a portion of the money owed to FTX, Celsius, and Voyager clients is accounted for in sales. The case is more complicated due to the lack of trustworthy financial information. Moreover, the company’s founders are investigated for possible crimes. This makes it even more unclear for crypto customers how much FTX creditors may recover in bankruptcy.