• Investors are now buying bankruptcy claims from Celsius, FTX, and Voyager customers for a fraction of their value.
• The Mt. Gox incident serves as a reminder of what may lie ahead, as bankruptcy administration can take many years to resolve.
• Several firms specializing in buying bankruptcy claims are taking advantage of users wanting to move on.
With the rise of digital currency, the number of people investing in cryptocurrency has seen a sharp increase. Unfortunately, this has led to a number of cases where investors have been left in the lurch after their funds were lost or stolen. Now, investors are taking matters into their own hands by purchasing bankruptcy claims from customers of Celsius, FTX, and Voyager for a fraction of their face value.
The Mt. Gox incident serves as a reminder of what may lie ahead for those who are unable to get back their funds. The Bitcoin exchange shut down in 2014 after being hacked for a reported 650,000 to 850,000 BTC. Some eight years later, administrators are only now preparing to distribute the remaining assets to users. Around 140,000 BTC will be repaid, representing an approximate 20% return on the lower estimate of total losses or a 16% return on the higher estimate.
In light of this, many users have opted to avoid the bankruptcy process by selling their claims for a fraction of their value. Investment firm Cherokee Acquisition said creditors holding $1 billion with FTX, and $100 million at Celsius, had approached them to negotiate deals. Similarly, bankruptcy marketplace Xclaim, which matches buyers and sellers of bankruptcy claims, has seen a surge in demand for these claims.
Of course, there is still the possibility of creditors receiving more than what they initially paid for the claims if the companies are able to pay out the full amount. However, with the process of bankruptcy administration dragging on for years and the uncertain nature of these proceedings, many investors have decided it is best to take a loss and move on.
Ultimately, this serves as a lesson for those considering investing in cryptocurrency. With the potential for losses and long wait times for any potential payouts, it is important to do research and understand the risks involved.