FTX Customer Sues Hedge Fund Over Alleged Bankruptcy Gains

An FTX user, Nikolas Gierczyk, sued hedge fund Olympus Peak, which bought his FTX claims, claiming it stole some gains from his bankruptcy claims.

Gierczyk's complaint alleges that Olympus Peak refused to honor their agreement by withholding additional recovery of his funds.

This development comes as the court approves the FTX reorganization plan, which is expected to repay over 120% of creditor claim values.

FTX User Files Lawsuit Against Hedge Fund Over Bankruptcy Gains

According to a recent Bloomberg report, an FTX user named Nikolas Gierczyk from California has reportedly sued hedge fund Olympus Peak. Gierczyk filed the complaint on October 10 at the US federal court in Manhattan.

In the suit, the user claimed the hedge fund could amass over $1 million in profits from its deal. The plaintiff also pointed out that the firm had dishonored the right to further recovery, and he agreed with this.

The report revealed that Gierczyk sold his $1.59 million claim against FTX to a hedge fund at a 42% discount last year, so he received a payout of $930,000 from the firm.

However, the bankrupt crypto exchange recently received approval for its reorganization plan from the US Bankruptcy Court. This situation allows the FTX customers to receive between 129% and 146% of their claims.

Subsequently, the hedge fund could receive between $2 million and $2.3 million for Gierczyk's claims, representing over $1 million in profits from the purchased claims.

The plaintiff argued that the hedge fund promised him any excess distribution from the bankruptcy.

However, Olympus Peak made clear that they would not be fulfilling their end of the bargain.." Gierczyk stated.

Olympus Peak Asset Management (OPAM) is a New York-based hedge fund manager. Founded in 2017, the firm focuses on credit and event-driven opportunities in financial operations.

The Long Wait For Reorganization Plan and Distribution

Since 2022, the bankrupt crypto exchange FTX has followed the court proceedings over funds recovery and its restructuring plan. On October 7, the US Bankruptcy Court finally approved the exchange's reorganization plan.

John J. Ray III acknowledged the approval as a significant step for the firm to repay its creditors. He said the exchange plans to give back 100% of its customers' claims with additional interest for non-governmental creditors.

Further, Ray tagged the FTX distribution as the largest and most complex bankruptcy estate asset distribution in history."

Meanwhile, the repayment plan does not include any asset appreciation between November 2022 and 2024. Creditors will only receive the value of their assets as of November 2022 before FTX's implosion.

In response, FTX creditor Sunil Kavuristatedthat the reorganization plan repays creditors just 10%-25% of their crypto.

While the waiting period of the FTX bankruptcy proceedings elongated, many FTX users sold their claims to hedge funds. Notably, in 2022, some hedge funds and debt investors purchased claims for users of bankrupt companies like FTX, Voyager Digital, Celsius Network, and BlockFi.

Moreover, some users preferred to sell their claims in marketplaces instead of receiving repayment through prolonged bankruptcy processes.

Data from Cherokee Acquisition-owned Claims Market showed that users sold their FTX claims worth over $600 million.

The post FTX Customer Sues Hedge Fund Over Alleged Bankruptcy Gains appeared first on The Tech Report.