FTX debt trading heats up, investors rush for acquisition

As the FTX bankruptcy case progresses, a silent battle for the exchange's claims is underway. Several well-known investment firms are actively negotiating the acquisition of these claims, including some large asset management companies. Meanwhile, some smaller investment institutions have begun purchasing claims from hedge funds eager to exit.

As a former giant in the cryptocurrency exchange market, FTX left about 1 million creditors after filing for bankruptcy protection, with debts amounting to billions of dollars. According to court documents, the debts of just the top 50 creditors total $3.1 billion. In the face of a lengthy bankruptcy process, some creditors are beginning to seek rapid liquidation options.

However, the current sale of claims may incur huge losses, as the claim prices are only a few percent of face value. The acquirer of the claims needs to patiently wait for the bankruptcy proceedings to be completed in hopes of obtaining greater returns.

An experienced debt trading expert stated: "The market has a strong interest in these debts, but many people lack an understanding of their complexity." He has been involved in several debt acquisitions from cryptocurrency company bankruptcies, including the well-known exchange Mt. Gox, which was hacked in 2014.

The collapse of FTX has dealt a heavy blow to many institutional investors. Some crypto hedge funds have publicly stated that they have large amounts of funds trapped on the FTX platform. Most of these funds hope to extricate themselves as soon as possible, rather than face prolonged legal proceedings.

Currently, some small investment firms have acquired millions of dollars in FTX debt at face value prices of 5-6%. Reports suggest that approximately $100 million in debt held by a Singapore fund manager is under negotiation, while a $23 million debt involved with a German fund has also attracted buyer interest. These funds typically ask for close to 10% of face value.

Assessing the future value of bankruptcy claims is a complex process. While a rough calculation can provide a general understanding of available assets and liabilities, substantial returns often depend on legal arguments. Some investors bet that U.S. courts may recognize client assets held in trust based on British trust law, which means that certain creditors may obtain priority repayment rights.

However, not all debts are related to client assets. There are also some employment contracts of FTX employees circulating in the market, which contain some surprising terms, such as long-term salary guarantees and substantial annual raises. However, industry insiders believe that U.S. courts are unlikely to enforce such terms, and these unpaid wages may be nearly worthless in bankruptcy claims.

As the FTX bankruptcy case continues to progress, the trends in the debt trading market will become the focus of industry attention. Investors need to carefully assess risks when participating in this market and have a full understanding of the complexities of the cryptocurrency industry.