Betting big on FTX's bankruptcy claims, he made $25 million
TechFlow Selected TechFlow Selected
Betting big on FTX's bankruptcy claims, he made $25 million
A high-stakes bet with a return rate exceeding 700%.
Navigating Web3 tides with focused insightsBy Niamh Rowe, Fortune
Translated by Luffy, ForesightNews
When rumors began circulating online that FTX was in trouble, Louis d'Origny, one of FTX’s customers, paid little attention and instead turned his focus back to the friends he was hosting at his Miami Beach apartment.
“Fake news,” he recalled. He closed his laptop, stepped away from the increasingly anxious crypto community, and spent the day relaxing on the beach.
But a few hours later, the mood shifted. Returning home, he saw tweets about FTX clients’ withdrawal requests being denied.
“Things got hectic quickly,” he recalled. As the sun set through his floor-to-ceiling windows, the then-31-year-old wondered what would happen next.
“Then,” he said, “suddenly we couldn’t withdraw our money from FTX anymore.”
D’Origny is one of over a million victims trying to recover lost funds from FTX after the exchange collapsed following the exposure of financial fraud by co-founder Sam Bankman-Fried.
“At the time, it felt like the end of the crypto world,” he said. “The outlook was extremely bleak—no one thought Bitcoin would ever hit new all-time highs again.”
But in crypto’s darkest hour, d’Origny’s thinking began to shift.
Louis d'Origny has purchased over 1,000 FTX bankruptcy claims since December 2022
“My view was that Sam hadn’t had enough time to carry out such extensive fraud and lose that much money. I was very confident they could recover a significant amount,” he said.
D’Origny spotted an opportunity: many creditors like himself wanted to recoup at least some of their funds, but when bankruptcy was declared, there was no clear information or guarantee about how the exchange would raise the total $8.7 billion shortfall. In other words, creditors might sell their claims at steep discounts.
So what if they could hedge their claims?
Claim trading: risk and opportunity
D’Origny had previously used his own boutique fund, Arceau, to buy some Celsius bankruptcy claims, but he was still a novice in this space. Most investors he knew didn’t want to touch FTX—no one was willing to put up capital to buy these claims.
But within weeks of the Miami incident, d’Origny began using his own money to buy FTX positions from hedge funds and demanding liquidation.
“We didn’t know any more than anyone else about the bankruptcy. We took a big risk—I just said it and did it,” d’Origny told Fortune.
Trading bankruptcy claims is a high-risk, high-reward strategy. Claim traders are believed to have made hundreds of millions, even billions, from the bankruptcies of Lehman Brothers, Enron, and General Motors. But more often than not, claims ultimately turn out to be worthless.
“The outcome ended up being much better than I imagined,” he said.
When a company goes bankrupt, creditors face a long legal process in court with no guarantee of how much of their claim they will recover. Instead, many choose to immediately sell their claims for cash to buyers willing to take on the risk of potential value collapse, with losses depending on how much the bankruptcy estate can recover.
Since FTX filed for Chapter 11 bankruptcy in U.S. District Court in Delaware on November 11, 2022, calculating the exact timing and value of claim trades has been complex. Industry traders told Fortune that some trades occur on online platforms, while others are private deals where buyers don’t need to immediately file transfer applications—creating delays—and some claims are only reported as self-held.
As of March 28, 49 trades exchanging claims worth over $439 million have taken place on Claims Market, a leading industry online platform. Meanwhile, according to court records as of March 20, hedge funds have acquired more than $2.3 billion in deeply discounted claims.
Although the bankruptcy court has yet to set a specific date for creditor payouts, it now appears likely that they will be fully repaid. “It looks like customers will get full repayment,” Bankman-Fried told the Manhattan courtroom during his sentencing on Thursday.
When claims were first approved, creditors sold them at low prices. Over 60 trades worth more than $1 million each have already occurred—the price rising from around 10% in November 2022 to as high as 93% today, reflecting growing confidence in repayment.
Meanwhile, two people familiar with claim trading told Fortune that due to rising cryptocurrency values and the sale of FTX’s stake in AI startup Anthropic for over $880 million, claim values could exceed their initial worth by 120% to 140%.
A gamble with over 700% returns
Claim buyers told Fortune that the appointment of John J. Ray III as CEO shortly after FTX filed for bankruptcy also boosted interest in claims. “He immediately started selling off all uncertain (volatile) assets—institutional claim buyers liked that because they don’t want Bitcoin,” d’Origny explained.
According to data submitted in FTX case filings, the estate has so far recovered approximately $7 billion in assets, including liquidated cryptocurrencies, 38 properties in the Bahamas, and $2.6 billion in cash.
The estate includes roughly 59 million SOL and 21,482 bitcoins, which have risen about 1,000% and 343% respectively since the company filed for bankruptcy. FTX plans to sell 41 million SOL to institutional investors at a 68% discount to current market prices—worth approximately $7.65 billion at the time of publication. This has angered some victims, including Sunil Kavuri, who criticized Bankman-Fried during sentencing for “constantly lying, saying we’d all be fully compensated.”
As of March 20, Chapter 11 filings show d’Origny had purchased around $29 million in claims. He says he bought them for $3.5 million using personal funds: “It’s my family office investment with some friends.” The return on this investment exceeds 700%.
He bought his first claim while reuniting with family for Christmas. He recalls his parents’ worried expressions as they joked that because of his gamble, the entire family might go bankrupt by next Christmas. According to contracts seen by Fortune, the nearly $3 million claim was settled on December 28, 2022, at 6% of its original value.
So far, the buyers poised to reap the biggest returns from the FTX wreckage are hedge funds specializing in distressed debt. As of March 20, Attestor, Baupost, and Farallon had purchased claims worth over $520 million, $518 million, and $346 million respectively, leading the pack. Sources confirmed these funds used other entity names.
Another major player in this gamble—and a friend of d’Origny’s—is Thomas Braziel, bankruptcy claims broker at 117 Partners, who represents some of the largest hedge funds in the market. Braziel said his first trade was on November 12, 2022, before the bankruptcy filing was even official. He spent about $240,000 to buy $8 million in claims (around 3% of stated value), and another $210,000 for $3.5 million in debt.
Claim trading isn’t easy
Current valuations are far removed from April 27 last year, when claim buyers narrowly avoided disaster.
During a Zoom call with a Singaporean creditor, d’Origny was about to finalize a $3 million claim purchase when news broke that the IRS had filed a $44 billion claim against FTX, accusing it of tax evasion.
“You know, during the call, we were terrified,” he said. But he ultimately decided to proceed with the purchase. “It was really, really scary.”
Although the IRS later reduced its claim to $20.4 billion, without objection, creditors would still have faced bankruptcy under such a scenario. “We would have gotten nothing,” d’Origny said.
However, FTX has launched a legal fight against the claim, asking the court to dismiss it, arguing it would “potentially indefinitely halt the debtor’s progress and any distributions to customers and other creditors.” In other words, since the IRS claim would effectively make defrauded victims pay for themselves, it’s unlikely to succeed, sources told Fortune.
In July, FTX launched its own public portal for customers to file claims. But in the early days of trading, information on which assets could be liquidated or how claims could be verified was limited. D’Origny said many efforts seemed crowdsourced via Twitter, and KYC processes were both time-consuming and makeshift.
“Buying claims was really, really difficult,” said Braziel, adding that at least two or three of the claims he bought turned out to be fraudulent.
Due to the fast pace of claim verification, d’Origny purchased 40 claims in the first year alone. That sparked another idea: automate the due diligence process. In December last year, he co-founded his own portal, FTX Creditor, which he describes as a “custom CRM, KYC, and due diligence solution” that shortened the verification process from days to 30 minutes. The company now has 14 employees across continents, answering creditor calls 24/7.
The firm specializes in claims under $100,000, aiming to give retail investors a convenient way to complete sales via a 30-minute call, avoiding being stuck in lengthy transaction confirmations.
Public records show that since December, FTX Creditor has purchased nearly 1,000 claims worth about $100 million. Market estimates suggest that assuming an acquisition price of 70% of claim value, the company stands to make around $30 million in profit—some of which may come from d’Origny’s earliest purchases.
But d’Origny explained that rising claim values have slowed trading activity. Still, according to a contract reviewed by Fortune, more than $6 million in claims were purchased this week alone, and Braziel continues to buy claims at 70% discounts.
D’Origny plans to keep running FTX Creditor beyond the FTX case, but once the claims are paid out, he’ll take a vacation first.
Was investing in these claims a calculated act of brilliance? Perhaps. But in D’Origny’s view, it was simply a matter of chance. He used a word quite different from brilliance: “luck.”
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@FortuneMagazine
