FTX investor takes hedge fund to court over bankruptcy windfall

A user of FTX, a failed cryptocurrency exchange, is suing a hedge fund, claiming it profited from FTX’s bankruptcy. This lawsuit emerged after a federal court approved a plan for FTX to repay its creditors.

Per a Bloomberg report, Nikolas Gierczyk, the plaintiff from California, sold his claim against FTX to a hedge fund called Olympus Peak. The claim was valued at $1.59 million, but he sold it at a discount, accepting 42% less than its full value.

He made this decision while FTX was undergoing bankruptcy, uncertain about how much he would actually receive if he waited.

Subsequently, FTX received approval for a plan to reimburse its customers. According to this plan, claimants might recover much more than expected—between 129% and 146% of what they were owed.

Now, Gierczyk believes that Olympus Peak owes him more money since he sold his claim for much less than he might have received if he had retained it.

FTX, once a prominent name in the crypto world, went bankrupt in November 2022 after failing to return customers’ funds, leaving many users without access to their money.

Recently, the court approved a plan allowing most creditors to receive 119% of their money in their accounts when FTX went bankrupt. For example, if someone had $1 in FTX, they would now receive $1.19.

FTX’s new CEO, John Ray, announced that the company recovered between $14.7 billion and $16.5 billion in assets. This recovery was achieved by selling investments made by FTX and its related company, Alameda Research.

Despite the notable recovery, some former customers continue to express dissatisfaction. They contend that due to the increase in cryptocurrency prices, particularly Bitcoin, since FTX’s bankruptcy, reimbursements should reflect the current value of their assets rather than their worth at the time of the bankruptcy filing.