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Analysts' Insights

Analysts' Insights

FTX Bankruptcy Claims Reach New Highs

1) The Mt. Gox trustee Nabuaki Kobayashi, has officially extended the deadline for repaying the exchange’s creditors from Oct 31, 2023, to Oct 31, 2024. This change eliminates the potential sale of 142k Bitcoins, which could have created an overhang in the market. However, it also suggests that creditors may have to wait a long time to recover their funds, considering that Mt. Gox collapsed back in 2014.

2) In essence, it means that users might have waited a decade to recover their investments. When Mt. Gox collapsed, Bitcoin was trading at $500, and while users may ultimately receive much more than their initial investment due to the increase in Bitcoin’s value since then, it’s important to note that the hacker had sold most of the stolen tokens early on, most for less than $100 per Bitcoin. As a result, those specific funds are irretrievable.

3) Around 8 million customers experienced losses on FTX, and Sam Bankman-Fried’s trial is scheduled for Oct 2, 2023, with an estimated duration of six-weeks. Bankruptcy lawyer fees are currently between $250m and $300m, and will likely reach $500m by next year.

4) By Sept 29, 2023, customers of FTX will need to submit a claim if they disagree with the proposed amount calculated by FTX. However, if there’s no dispute, they don’t need to submit a claim. Claims related to FTT tokens will be treated as subordinate and considered as equity in FTX. As for NFTs, they will likely be returned in kind if available.

5) Although FTX creditors have received the approval to liquidate crypto and return fiat to users, it’s expected that they will liquidate around $100m per week over the next nine months. Distributions are targeted for Q3 2024, but this process can be delayed — as evidenced by the continuing Mt. Gox saga.

6) In June, FTX reportedly utilised customer funds to invest in ChatGPT competitor ‘Anthropic’, which raised $450m at a $5bn valuation. FTX’s stake in Anthropic is valued at around $500m.

7) The creditors have refrained from selling the stake, especially in light of Amazon’s announcement of a $1.2bn investment via its Web Services division, with the possibility of increasing that amount to $4bn. This could lift the value of FTX creditor claims. ChatGPT is worth approximately $30bn. Drawing a comparison between the two could eventually value FTX’s stake at $2bn.

8) The FTX recovery process appears to be largely complete, amounting to $7.3bn, with only minor donations (such as to Stanford University) still pending.

9) There is a potential $2.1bn that could be reclaimed from Binance, another $700m from an investment firm linked to a former Clinton aide, K5, and the $500m stake in Anthropic, which could potentially gain additional value soon. Moreover, there are expectations of FTX 2.0 becoming a reality, which could significantly benefit claims holders.

10) The successful recapitalisation of an exchange has been achieved before, with every creditor becoming an equity owner. Understanding this dynamic could be of material significance to claims holders. As a result, FTX claims are trading at 37% of their expected payout, up from just 15% in January 2023. This development is promising news for all FTX creditors.

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