The people that sold their stakes to people like Scott Galloway must be kicking themselves. Great trade.
Yes, he was.
The reason people are being made whole now is that a couple of years down the line, some of his investments and acquisitions are now worth considerably more than they were at the time of bankruptcy. But at that point t FTX was insolvent and SBF was telling lies all over the place.
https://www.forbes.com/sites/dereksaul/2023/01/11/bankrupt-f...
Anthropic was another $1 billion
FTX was insolvent at that time.
In the US, a regulated exchange is required to hold your securities in segregated accounts, and cannot play fun games with them. Crypto "exchanges" are a joke.
> It did not help that CZ triggered a run on the assets at the worst time; otherwise it likely would have been fine
I find that unlikely. SBF was doing a bunch of risky things with FTX's assets. If he hadn't been found out, he likely would have done more and more risky things, and as Bitcoin's price recovered, he would have used that higher price to justify doing even more risky things.
I doubt there would have been many (if any) times when FTX could have paid out all its depositor obligations.
They're not a lender, they're just an exchange. Regardless of taking on debt to manage settlement, the fact that people did not own the assets in their FTC accounts is insane.
And the FTX token that had a run triggered was something like 90% held by FTX - the value they accounted for was based on a tiny circulating pool of them. It was almost the classic "If I print 10m of these, and sell you one for a dollar, I've got tokens worth $10m now, right?"
> “I’ve never worked on a bankruptcy case that got better. It always gets worse,” said Commissioner Raquel Regalado, a lawyer who now works as a broadcaster. “The idea of just getting out as early as possible seems like a great idea to me. “
Those were some expensive words. And in general, always somewhat expensive words because the hedge fund buyers generally don't work "lose" into their models.
https://www.miamiherald.com/news/local/community/miami-dade/...
Selling your claim is only a good deal if the hedge funds are drunkenly stupid, you have no other assets/lending sources and are going to die soon or have debt at payday loan rates.
Or put another way - if there were an investment opportunity that that had an 80% chance of 3x-4x returns in the next 2-3 years, I might consider investing 25% or even 50% of my net worth in that opportunity. But I certainly wouldn't invest 95% of my net worth.
I find it weird that you condemn that decision based on perfect hindsight.
> Selling your claim is only a good deal if the hedge funds are drunkenly stupid, you have no other assets/lending sources and are going to die soon or have debt at payday loan rates.
Selling your claim reduces your exposure and eliminates the risk that you'd get even less after the bankruptcy process concludes. It also lets you book the loss now and move on. That's valuable to some people. Consider that people have different motivations and needs than you do.
Your cited article makes it abundantly clear that the provenance of said $17 million claim was a default clause entitling Miami-Dade County to three years worth of naming-rights fees.
They sold that speculative claim for $5 million cash---effectively recovering that year's otherwise uncollectible receivables---then immediately turned around and locked in a 17-year, $117.4 million agreement with Kaseya[1]; back-of-the-envelope says that's an implied ~$5.4 million (2023 dollars) per year with 3% annual inflation adjustment baked in.
Call me naive, but I imagine that if you're in the business of running a multi-purpose arena with real opex, you've gotta be the dumbest risk manager in South Florida to allocate expensive legal resources in chase of speculative claims when a mutual opportunity to repair a gapping hole in your balance sheet presents itself and you have a willing long-term replacement suitor lined up.
[1] https://www.miamidade.gov/global/news-item.page?Mduid_news=n...
Usually when you have several suitors that purely have profit in mind, you're the mark. Doubly so when their cost of capital is higher than your own.
> to allocate expensive legal resources in chase of speculative claims
On a claim this big, the bankruptcy trustee takes care of that for you. They're literally a fiduciary. The cost would be reading whatever gets mailed to you, but at the end of the day, there isn't much control you have over the ultimate outcome.
And uhhh, in terms of credit worthiness, Kaseya has an interesting history: https://en.wikipedia.org/wiki/Kaseya_VSA_ransomware_attack .
They they sold the stake ultimately worth 17 million, but they got their rights back, which they resold for 16 million. As long as they sold their stake for 1 million or more, they are in the green.
(They won on the reselling of the naming rights too by leasing them out for more per year than ftx)