Crypto Industry Titans Seek Bankruptcy Solutions, FTX Leads the Charge
Recent data shared by Messari’s Ryan Selkis paints an intriguing picture of how leading financial firms like Alameda Research, BlockFi, Celsius, Genesis Global, FTX Trading Ltd, and Three Arrows are approaching the bankruptcy buyout market.
A recent data shared by Messari‘s Ryan Selkis paints an intriguing picture of how leading financial firms like Alameda Research, BlockFi, Celsius, Genesis Global, FTX Trading Ltd, and Three Arrows are approaching the bankruptcy buyout market.
A Brief Primer on Bankruptcy Buyouts
When a company goes bankruptcy buyout, other firms can buy its outstanding claims or debts. The price these firms are willing to pay depends on how risky they think the investment is and how much profit they expect to make in the future.
The percentage figures indicate what these firms are willing to pay for a $1 claim against the bankrupt company.
Take these with a grain of salt, but these are the bankruptcy claim prices that are being floated to investors right now by middle men: pic.twitter.com/OXidpYPxNQ— Ryan Selkis 🪳 (@twobitidiot) August 31, 2023
Individual Company Analysis
Alameda Research is offering to buy claims against bankrupt companies at a rate of 12 to 16 cents for every dollar of the claim. This suggests that Alameda sees these assets as having a moderate level of risk, but still offering a fair chance for profit. In other words, they’re not offering rock-bottom prices, but they’re also not willing to pay top dollar.
This middle-of-the-road approach likely reflects a balanced view on how much they can earn from these distressed assets.
BlockFi is willing to pay 23 to 27 cents for each dollar of claims against bankrupt companies. This rate is notably higher than what Alameda Research is offering.
It suggests that BlockFi sees these assets as either less risky or more potentially profitable. In simpler terms, they’re willing to invest more upfront, probably because they think they have a good chance of making that money back, and then some.
Celsius is offering between 34 and 40 cents for each dollar of a bankruptcy claim, which is even higher than what BlockFi is willing to pay. This indicates that Celsius is very optimistic, or “bullish,” about these assets.
They’re willing to invest quite a bit up front, suggesting that they see these assets as either lower risk or potentially more lucrative. In other words, Celsius is betting that they can make a good return on these investments, so they’re willing to pay more initially to secure them.
Genesis Global (GG) is willing to pay an impressive 44 to 52 cents for each dollar of claims against bankrupt companies. Company offers the highest rate among the firms discussed, clearly signaling their optimistic view of these assets.
Essentially, they’re willing to pay more than half the value of the claim in some cases, indicating they see either very low risk or high potential for profit.
In simple terms, GG is making a big bet that these assets will turn out to be valuable, so they’re willing to invest a lot up front to acquire them.
FTX Trading Ltd
FTX has a more nuanced strategy when it comes to buying claims against bankrupt companies. They offer different rates based on the risk associated with the account from which the claim originates.
FTX is willing to pay between 25 and 38 cents for each dollar of a claim coming from accounts that have not withdrawn money in the 90 days leading up to the bankruptcy. They consider these accounts “no-risk.” On the other hand, for “high-risk” accounts that are close to the bankruptcy date, they offer a much lower 8 to 15 cents per dollar.
This tiered approach suggests that FTX is actively managing their risk. By offering different prices based on the perceived risk of the account, they’re diversifying their investment in these distressed assets.
In simpler terms, they’re willing to pay more for what they consider safer bets, while still taking some riskier bets but at a lower cost. This balanced approach allows them to spread their risk across different types of assets.
Three Arrows is offering just 7 to 9 cents for each dollar of claims against bankrupt companies, which is the lowest rate among all the firms mentioned.
This conservative approach suggests that Three Arrows sees these assets as either very high-risk or not particularly profitable. In other words, they’re not willing to invest much in these claims, probably because they don’t think the chances of making a good return are high.
This low-ball offer serves as an indicator that Three Arrows is extremely cautious in this market, aiming to minimize their risk by investing the least amount possible in these distressed assets.
Bankruptcy Buyout’s Key Takeaways
Bankruptcy buyouts in the crypto market offer a unique lens into the risk profiles and strategic directions of major players in the field. From the bullish outlook of Genesis Global to the cautious approach of Three Arrows, the range of offers indicates a diverse set of strategies for capitalizing on distressed assets.
As the crypto landscape continues to evolve, these rates may serve as a bellwether for broader market trends, providing valuable data points for investors and stakeholders alike.
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