Alexander Nikolas Gierczyk, a former FTX customer who sold his $1.59 million claim on the bankrupt cryptocurrency exchange to hedge fund Olympus Peak at a 42% discount in November 2023, said the company will recover additional amounts. He sued the company, claiming it had broken the contract.
In papers filed Thursday in U.S. District Court for the Southern District of New York, the California resident said Olympus Peak underpaid him and now stands to make more than $1 million from the deal after U.S. Bankruptcy Judge John Dorsey recently approved the assets of FTX Real Estate. He claimed that he was planning to bring it in. Reorganization plan.
The estate plan is expected to repay FTX customers between 129% and 146% of their claims in fiat at the time of bankruptcy, according to the filing. Olympus Peak would have made approximately $670,000 from this claim upon a 100% recovery in fiat terms. However, with a recovery rate of 129%, the hedge fund would make about $1.1 million on the claim, and at 146%, it would make about $1.4 million.
Despite the discounted sales, Gierczyk said the deal with the Greenwich, Conn.-based hedge fund had an “excess claim provision” that gave it additional clawback rights at the same rate for any excess distributions resulting from bankruptcy.
Hedge funds often purchase claims on distressed assets at a discount, providing claimants with quick payouts while the funds await a potentially larger recovery through bankruptcy proceedings.
“If the claim is ultimately allowed… in an amount greater than the claim amount… Buyer… will purchase the overcharge amount by paying an amount equal to the overcharge amount multiplied by the purchase rate,” the clause states. do. Submit documents.
Gierczyk argues that he consented to the sale because this provision applied “if his claims were paid at an equal or greater level through the bankruptcy proceedings.” But the plaintiffs’ attorneys claim that Olympus Peak “has made it clear that it will not perform the purposes of the agreement.”
“This lawsuit is completely without merit and is based on a clear misunderstanding of the parties’ contracts,” Olympus Peak legal representative Kramer Levin told The Block.
FTX bankruptcy
FTX filed for bankruptcy in November 2022. The exchange’s CEO, Sam Bankman-Fried, was found guilty a year later on seven criminal charges, including two counts of wire fraud and conspiracy to commit wire fraud, and was sentenced to nearly 25 years in prison in 2020. prison.
About 94% of creditors in the “dot-com customer entitlement claims” class that returned ballots, worth about $6.83 billion in value, voted in favor of the restructuring plan, The Block previously reported.
But the plan drew criticism from Sunil Kavuri, head of FTX’s largest creditor group. He said that in the event of bankruptcy, the property would have to pay out the cryptocurrency assets in kind rather than their dollar value.
Updated with input from law firm representing Olympus Peak.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.