The Lucrative FTX Bankruptcy Trade and Ongoing Legal Battle

The FTX cryptocurrency exchange crash in November 2022 left a trail of aggrieved investors and customers who had their funds frozen due to the complex bankruptcy case.

However, the collapse presented a lucrative opportunity for some wise distressed asset investors like Attestor Ltd., a boutique London firm.

Attestor specializes in trading claims against bankrupt companies at steep discounts in hopes of profiting when the bankruptcy estates payout.In the case of FTX, Attestor started scooping up claims from FTX's former retail customers and crypto traders who were desperate to recover at least something from the exchange's remains.

The Messy Legal Battle

The firm acquired these claims at rock-bottom prices from the account holders. The firm gained as the crypto market mounted an unexpected comeback, with Bitcoin's value soaring from under $17,000 in November 2022 to over $70,000 by March 2024.

Due to the monumental rise, the value of Attestor's FTX holdings recorded a rapid increase- first 50%, then 100%, eventually nearing 200% profits at one point. But one deal involving a little-known Panamanian firm called Lemma Technologies, which held a significant claim against FTX, has hit a major roadblock for Attestor.

In June 2023, Lemma had agreed to sell its FTX account claim to Attestor for $58 million. Fast forward to March 2024, and that claim is now valued at $165 million based on the bankruptcy estate's ability to pay out customers.

Lemma, controlled by an embattled South Korean crypto trader Junho Bang, has refused to honor that original agreement, according to a lawsuit Attestor has filed in a New York court.The firm's lawyers allege this is a seller's remorse" case now that the claim's value has skyrocketed.

Court filings show Attestor is pleading to be allowed to immediately consummate the transactions."But Lemma has dug in, saying it won't proceed with the transactions or otherwise honor the trade confirmations, unless compelled by force of law to do so."

The Crypto Connection

The Lemma principal at the center of this case, Junho Bang, has much larger legal troubles. South Korean authorities indicted him in February forstealing digital assets from Haru Invest.

This crypto lending platform offered yields as high as 50% before collapsing in the FTX contagion.

Haru had initially claimed it pulled assets off FTX before the exchange failed. But months later, it abruptly froze customer redemptions.They cited issues with a service provider firm called B&S Holdings and claimed the company had provided false information. Court documents identify B&S as being majority-owned by Bang.

Junho Bang is a partner and majority shareholder in B&S Holdings, and he also invested in FTX's token FTT.However, In January 2023, Bang transferred his FTX claim to his company, Lemma Technologies, at the centre of Attestor's lawsuit over a disputed trade.

While the Haru case and the Attestor's lawsuit over the FTX claim sale are separate legal matters, the South Korean trader's troubled crypto trade looms large over both. For distressed asset specialists like Attestor, the FTX bankruptcy has exposed the firm to a much riskier market dynamic than typical distressed-debt trading.

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