Bankruptcy Claims Trading

Scott Galloway shares how he profited from buying FTX bankruptcy claims by identifying hidden value in the company's venture investments during its bankruptcy proceedings.

Key Points:

• Bankruptcy Claims Market:

  • When FTX went bankrupt, customers with lost funds received claims against the company
  • Claims typically trade at steep discounts (example: $1M claim selling for $100K)
  • Claims buyers offer immediate cash vs uncertain future recovery

• Investment Opportunity:

  • Claims were trading at 22 cents on the dollar
  • Unlike typical fraud cases where money was spent on luxuries, SBF invested heavily in ventures
  • Key asset: $500M investment in Anthropic (leading AI company)

• Strategy Elements:

  • "Run towards fire" mentality during crisis
  • Look for valuable assets within bankruptcy proceedings
  • Use major assets as downside protection
  • Buy claims at discount when others are fearful

• Risk/Reward Profile:

  • Downside protected by known valuable assets
  • Additional upside potential from other recoveries
  • Reputational risk of being involved with failed company
  • Requires quick decision-making during crisis

Note: While Galloway's thesis about Anthropic's value was incorrect (sold for ~$800M-900M, not $4B), the investment still proved profitable through other recoveries.