FTX Bankruptcy Claims Arbitrage

Scott Galloway shares how he made a successful investment in FTX bankruptcy claims.

"I read the FTX bankruptcy filing and essentially they list all their assets. When you declare bankruptcy, your creditors come in and say 'we're going to take all the assets, sell everything, and then divide it up pro rata to the creditors based on the claims they have.'

There was approximately $8 billion in claims against bankrupt FTX. I went through the list of assets and one was that they'd made a $500 million investment in Anthropic. I couldn't find the valuation when they made the investment, but I assumed it was about $5 billion, so they probably owned about 10% of Anthropic. I estimated it was worth around $40 billion, meaning their stake was worth about $4 billion.

So I thought creditors would eventually get 50 cents on the dollar just on the Anthropic shares. At that time, you could buy claims against bankrupt FTX for 22 cents on the dollar. I bought $10 million worth of claims for $2.2 million.

It's better to be lucky than good - crypto took off, everything they had invested in went crazy, and it looks like we're going to get 160 cents on the dollar. That's worked out really well.

I found this guy named Thomas Brazell who was making a market in these claims. I contacted him and said 'I have capital I want to put to work here. I'll give you 10% of the upside if you go buy these claims.' Every 48 or 72 hours he'd say 'I found a claim of $383,000 and they want $90,000 for it' and I'd say 'great' and press yes. It looks like we're going to get $15 million off of a $2.5 million investment."