Key Insights:

• FTX creditor claims fetch over 50 cents on the dollar, reflecting rising market trust.
• Recent investments in Anthropic boost FTX’s assets, aiding creditor compensation.
• Challenges remain in KYC/AML, but FTX’s “shortfall claim” promises a 90% asset distribution.

Surge in Claim Valuations

In the ever-evolving world of cryptocurrency, FTX creditor claims are making significant strides, with recent transactions surpassing the 50 cents on the dollar mark. This upward trend reflects growing confidence in the market and signals a potential turnaround for creditors navigating uncertain waters.

Thomas Braziel, a partner at 117 Partners, a firm specializing in crypto bankruptcy claims, has shed light on this burgeoning market. According to Braziel, certain claims are now fetching prices above 50 cents on the dollar, marking a notable shift in market sentiment. Specifically, a claim valued at over $20 million was recently auctioned off for 52 and 53 cents on the dollar on October 20.

Factors Bolstering Market Confidence

Notably, these higher price tags are typically associated with the most robust claims. Braziel elaborates that the market has shown a particular strength for smaller claims, those ranging between $500K and $800K. These claims currently range between the high 30 cents and low 40 cents. Nevertheless, it is crucial to understand that only the most straightforward and clean claims achieve these prices, with the right buyer being a key component in these transactions.

The market’s buoyancy can be partly attributed to recent developments involving clawback efforts from the bankrupt crypto exchange and successful capital-raising activities from companies in which FTX had previously invested. One such company is Anthropic, which raised a substantial $580 million in a series B funding round in April 2022, led by Sam Bankman-Fried, the former CEO of FTX.

After this funding round, on September 25, Amazon announced a significant $4 billion investment in Anthropic. With Anthropic’s valuation potentially reaching $30 billion, FTX’s initial investment in the company now stands at an estimated value between $3.5 and $4 billion. This valuation could play a pivotal role in compensating FTX creditors, as suggested by a post from the FTX creditor coalition dated October 4.

Anthropic to raise from Google at 20-30B valuation, putting FTX's stake at 3-4.5B.

FTX customers now stand to be made whole. pic.twitter.com/Vy9mZc8bEl

— FTX 2.0 Coalition (@AFTXcreditor) October 3, 2023

Addressing Challenges and the Road Ahead

While the market for FTX claims shows signs of revival, certain issues still need addressing. Braziel highlights ongoing challenges, particularly in the Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols. Despite these challenges, the overall trend in claim valuations is a positive indicator for creditors.

Adding to the positive momentum, the Ad Hoc Committee of non-US FTX customers recently announced a Settlement and Plan Support on October 18, providing much-needed clarity and support for firms looking to trade their claims. A key aspect of this amended support plan is the introduction of the “shortfall claim,” a mechanism through which FTX debtors estimate a 90% distribution of assets to customers of both FTX.com and FTX.US. This shortfall is estimated at approximately $8.9 billion for FTX.com and $166 million for FTX.US.