FTX bankruptcy debt trading is hot, investors are scrambling for acquisition

As the cryptocurrency exchange giant FTX files for bankruptcy protection, approximately 1 million creditors face billions of dollars in losses. According to court documents, the debts of just the top 50 creditors amount to as much as $3.1 billion. In the face of a bankruptcy process that could last for years, some creditors are beginning to seek ways to liquidate quickly.

Multiple well-known investment firms are actively negotiating the acquisition of these debts. Some smaller investment companies have already purchased parts of the debts from hedge funds that are looking to exit quickly. However, this practice of prematurely selling debts may result in returns that are lower than the amounts distributed after waiting for the bankruptcy process to be completed.

Currently, the selling price of the debt is only a few percent of its face value, meaning that the seller will suffer significant losses. On the other hand, the debt acquirer needs to patiently wait for the bankruptcy proceedings to advance in hopes of obtaining higher returns.

The founder of an investment company stated: "The market has a strong interest in these debts, but many people have limited knowledge of the relevant information." He also mentioned that some people are even unclear about the concept of stablecoins.

For institutional investors, the deep liquidity pool that FTX once claimed was highly attractive. Several crypto hedge funds have large amounts of funds trapped on the FTX platform. For example, one asset management company has about $12 million locked up, while a "vast majority" of assets from another startup asset management firm are also trapped on FTX.

Many fund companies hope to extricate themselves as soon as possible to avoid getting caught in prolonged legal proceedings. Some FTX clients even wish to complete the sale of their claims before the end of the year in order to write off losses for tax purposes. Currently, claims worth millions of dollars are being traded at prices of 5-6% of their face value, while larger claims (such as $100 million) are priced close to 10% of their face value.

Assessing the future value of bankruptcy claims is a complex task. A rough calculation can provide a general understanding of available assets and liabilities, but obtaining high returns often depends on the progress of judicial proceedings. Some analyses suggest that if U.S. courts recognize client assets held in trust form based on trust law, those clients may gain priority repayment rights.

In addition, some employment contracts from FTX have also become the subject of debt trading. It is reported that one contract promised wage protection for up to 9 years, including a minimum annual salary increase of 15% and full compensation after termination. However, some market participants believe that U.S. courts may not enforce such terms, making these unpaid wage claims nearly worthless in bankruptcy claims.