FTX debt has become an investment hotspot, with many well-known companies vying for acquisition.

Recently, several well-known investment firms are actively negotiating the acquisition of FTX's debts. It is reported that some smaller investment companies have already purchased part of the debts from hedge funds eager to exit. The transaction prices for these deals may be lower than the amounts ultimately distributed in bankruptcy proceedings.

As a former giant in cryptocurrency trading, FTX left about 1 million creditors after filing for bankruptcy protection last month, with total debts amounting to billions of dollars. Court documents show that the debts owed to just the top 50 creditors reach 3.1 billion dollars. While most creditors may wait for the bankruptcy proceedings to be completed, some have begun to contact bad debt brokers and buyers, hoping to exit as soon as possible.

Currently, selling debt means incurring huge losses, as the price of the debt is only a few percent of its face value. Meanwhile, debt acquisition requires patience, as the acquirer has to wait to recover more funds through bankruptcy proceedings.

An industry expert stated: "The market has a strong interest in these debts, but many people do not fully understand their complexity." He pointed out that some people are even not well-versed in basic cryptocurrency concepts.

Professionals experienced in trading complex crypto assets point out that acquiring such debts requires immense patience. He cites the example of a well-known exchange that left legal disputes after being hacked in 2014, which were only fully resolved eight years later.

Institutional Investors in Distress

FTX's claimed deep liquidity has attracted numerous institutional investors, including crypto hedge funds. Executives from some asset management firms have publicly revealed that they have large amounts of capital stuck on the FTX platform. For example, one asset management firm has about $12 million trapped, while "the vast majority" of assets from another crypto asset management startup have also been frozen by FTX.

Insiders indicate that most fund companies wish to extricate themselves as soon as possible, rather than face protracted legal procedures. Some FTX clients also hope to complete the debt sales before the end of the year in order to write off losses during tax reporting.

Currently, some investors have acquired several FTX debts at a price of 5-6% of par value, with nominal values of 2 million USD, 3 million USD, and 8 million USD respectively. It is reported that a transaction involving approximately 100 million USD in debt is under negotiation, and a 23 million USD debt from a German fund is also in the discussion process. These funds typically ask for prices close to 10% of par value.

Debt Valuation: More Art than Science

The assessment of the future value of bankruptcy claims is more of an art than a science. Experts say that rough calculations can provide a general understanding of available assets and liabilities, but substantial returns often depend on legal arguments.

One legal strategy that some investors are betting on is that U.S. courts will recognize customer assets as being held in trust based on relevant laws. This means that assets held in trust will enjoy priority rights, and the relevant customers are expected to receive payment preferentially.

It is worth noting that not all debts are related to customer assets. For example, a circulated employment contract includes a clause guaranteeing payment of salaries for the next 9 years. This contract was signed in August 2021, with an annual salary of $525,000, and guarantees a minimum annual raise of 15%, plus bonuses. The contract term is 10 years, and one of the clauses states that if the employee is terminated for any reason, they will still receive all unpaid wages, including annual raises.

However, an industry insider stated that U.S. courts are unlikely to enforce such provisions, and unpaid wages may hold little value in bankruptcy claims.