Distressed Crypto Investing: Buying Claims for Cents on the Dollar | Thomas Braziel

Transcript

no distress firms are willing to work on crypto it's like yourselves like no event companies are willing to work on crypto like there's too much reputational damage like they don't know about crypto they don't they think crypto is or whatever sorry now a curse in your pod but so so it was like it was like Green Field you know it's like if you can make it professional and you can jump into the space like the incumbents will basically just leave it for you to do this episode is brought to you by Circle the issuer of usdc which hopefully as you all know is the preferred stable coin of digital Natives and crypto natives with over 1.5 million holders globally you'll hear more about usdc

later in the show [Music] welcome back yeah welcome back to another episode of Empire we have uh we have Thomas uh I I don't really know exactly what Thomas does except that he is the best uh investor who invested like the intersection of distressed uh distressed asset investing in crypto have known Thomas for years um got connected with Thomas maybe I want to say 2018 possibly Thomas or 2017 through some like Mount gox claims stuff and have just kept in touch since so Thomas welcome to uh Empire my friend good thanks Jason thanks for having me on and uh like I don't know how we met I think I just showed up a bloxburg event

and I like explained myself and you're like oh that's kind of cool I remember early on you were asking me about oh that makes sense you were asking about your business and I can't remember if you guys ever raised VC money but you asked me if you should raise BC money and I said no and I don't know what happened what did you decide we took your advice we took your advice we never we never oh that's great I wasn't sure because of you but I was like honestly I'm talking against my own book here but you should no I'm sure you spoke to a million people I was like if you could make cash flow from the bin business like don't yeah all because of you my friend so anyways um I think it'd be a helpful place to start I want to obviously I'm

sure we'll end this conversation talking about FTX but there are a lot of other distressed Assets in crypto uh starting with Mount gox there's also stuff around Celsius um I think it'd be helpful to to just get like a lay of the land I know very little about this topic so I'm gonna have some really really dumb like five-year-old questions here um and I think let's start off with the easiest one which is just like what is distressed investing and is that even the best characterization of what you do yeah so I work for a large family office principally that's my principal job um trying to deploy their Capital they have of course final investment decision and they really control the strings um but I have my own company which is 507. so what does 507 do we do that and

we also like try to broker and and you know some not really act as Bankers but but basically facilitators of deals in the distressed world and I guess sort of special situation Capital raising so what does that mean it generally means I think it's better to characterize a special situation investing um it it you have this intersection of when companies are in need capital and you know what's going on in the markets and you have banks that won't touch it and then you sort of you you get in no man's land the no man's land is where we normally operate um where there's no there's no dearth of capital and um and you sort of have to figure things

out from a first principles perspective and that's that's the stress I mean you look at Howard marks oak tree and the mimos he writes and other people like you know Seth Carmen about post or even Warren Buffett but Warren Buffett sort of um is probably a bit more just totally in the value Camp um and they're all kind of flavors of value um and as someone uh rightly said you know all intelligent investing is value investing just like what's your definition of value um I think through distressed person it's normally like very asset driven very balancing driven um and also like very opportunistic so the fun part about distressed official situation investing is you're always learning about new areas and for myself

it was the same like I came in to destroy uh distress crypto through Mount Cox um and you know for me as someone who has nothing to add to the world I would think that the intersection of distressed and crypto is kind of like a unique and interesting area where there's a ton of unsettled case law and it's a growing industry I always thought there would be Cycles in crypto because it's such a cyclical thing if you look at the whatever you know if you look at uh like plan B's models you know the the stock to flow models or anything like it's hugely volatile and so that all that volatility comes a lot of you know full Cycles the full Cycles lead to

distress Cycles so again I told you I'm gonna have some some five-year-old questions here so let's use Mount gox as an example so yeah walk me through basically like you're explaining like different levels like there's you know you could buy a Bitcoin for like a third of the price people are loading up all the claims you have creditors you have the liabilities can you almost like just walk me through how with Mount gox specifically like how that unfolded uh leading us forward to today like how did you start buying claims who who were the who got the claims who who had the trust like who are the trustees basically do those guys it was a Japanese yeah so it was a Japanese insolvency filed in Japan and um and there was what's called a chapter

15 in the states which recognized the porn proceeding as the main proceeding those are the main black things that were going on there was a few articles about Mel Cox and I'm sure some old OG crypto guys like were involved had had claims things like that um but it wasn't it wasn't like Center Stage news um and uh there were some early distressed guys who tried to make a market in the claims but like when they filed in 14 like 14 15 16 and 17 the trade was okay because for the most part there were guys like there was a guy I mean he's not docs because his name is out there his name is uh Josh Jones and you're anything called Bitcoin Builder he allowed people to basically

trade their Mac ocks um account balances this is pre-petition to the insolvency in 14 like early and 14. and then uh once they filed for bankruptcy like he was actually buying their claims I think he had a financier who was helping him buy their claims he'd be buying them for like a third of the market value he was even less than that like I think a fourth of the market value when I say market value I mean like the look through value of the crypto they had found um and then so so it was always kind of like kind of an okay trade but not that interesting because I mean think about it you're locked in a bankruptcy that could take forever and yet you're getting Bitcoin at a third of the market price now if you're a total hodler and you think bitcoin's going a million dollars

um that maybe that's a great trade because now you're making three million for every million you know that somebody else makes but for most distress or special situation investors they're thinking like this is not so great because you don't really know what the irr is and you don't really know when the exit is so a lot of people like looked at it in a curious way but never really touched it and also it had the Live Wire being like dude if I pitch this in my investment Community I'm gonna get like laughed out of the room so that was all the way that was 14 15 16-17 and then 18 happened where there was a bit of a bull run and the trustee sold about um 40 000 BTC which was equivalent to about 600 million dollars or 650 million

there was some cash already there but it's like 600 million and the total was like 650 million dollars of um of uh it's Japanese Yen but let's just do it in dollars of US dollars that was raised so at that point you were able to basically buy claims at like a 400 million dollar valuation when there was even like 650 million of Fiat in the estate and yet there were still about 140 000 Bitcoin left so all that was freebie but the question in 18 was well maybe Bitcoin is not a property it's just currency or maybe it's just a financial contract so it's not a property and so you don't get the uplift in value

because Bitcoin had gone and petitioned made from 483 dollars to at the time I think about 10 or 12 000 US dollars so you follow me so even though they lost a bunch of the Bitcoin um Bitcoin had gone up so much in value that on a dollar basis you were made whole and then some but on a crypto basis of course you only got back like a 20 25th you only got back about 25 of the Bitcoin you initially put in so of course some people always say like oh if I had my 100 Bitcoin from my Cox that'd be worth blah blah blah blah I'm like dude you would have sold that Bitcoin 55 times over okay so stop with this whole like you would have never hold into this for this long like you and I both know

it you know and so the trade was very interesting in 18. so I I got a family office I try I literally pitched it to like 100 firms um and I think some were nice and polite and some were like this is the dumbest idea I've ever heard but I had one guy who didn't think it was dumb I thought actually I thought it was great he thought it was great it made imminent sense and I had other people who thought it was great but he was thought it was great and he pulled the trigger like he actually put money to work he didn't just say like yeah that sounds great call me email me you know you then you call an email and the person that responds to you like he actually responded he actually was proactive we actually got an LLC setup and we did the trade

and so that was the big time to do it and then marching forward from there we started working for a large crypto hedge fund to buy these claims that he was affiliated with um and the rest is sort of History so that trade worked out well and then from there I was like you know what this is really interesting like no distress firms are willing to work on crypto it's like yourselves like no event companies are willing to work on crypto like there's too much reputational damage like they don't know about crypto they don't they think crypto is or whatever sorry now a curse in your pod but so so it was like it was like Greenfield you know it's like if you can make it professional and you can jump in the

space like the incumbents will basically just leave it for you to do so so I saw that Greenfield opportunity and I basically always kind of had it as a side project on the same time I was working in regular distresses which is what I still do now now the Cycles come back around in 2022 um there's an enormous amount of opportunity and it's the same rhyming theme before getting into some of that stuff so with so with Mount gox how did so in 2018 you guys put Capital to work how much money did you guys invest buying up the claims not a lot not a lot like a few million dollars and but when the when they started

paying out the Bitcoin in what 2021 2020. no they haven't traded it out yet so they're they're two they're two dockets one is Mount Cox and one is bitcoinica and one is Bitcoin Builder so Bitcoin Builder this Josh Jones guy he's one of the largest creditors in Mount Cox so you can buy claims in Bitcoin Builder you can buy claims in malcot and you can potentially buy claims in um in this thing called bitcoinica the problem of the cornica is the claims are not accepted yet so it's a little more complicated but basically we invested a few million dollars at a valuation of maybe four to six hundred dollars per claim value and now the claim even with the pullback in crypto is probably about six

thousand dollars per claim so you can do the math you basically made like a 10x 12x whatever you want to call it um that's what that's today you know I mean it was there was a time when it was like 40 or whatever it was now it's come back a lot um and it was you know that was you guys doing this and it was also uh and it was also Fortress nobody right so it was myself and you know my business partner 507 and a small family office or an I shouldn't say small but a you know relatively in the world of finance a small family office and Fortress showed up so so I'd say it's on the record because who cares this point I'd pitch this deal to everybody I pitched it to definitely fish into

Fortress and I definitely pitched it to winces at at uh at um help me out Zappo I can hardly remember it because they don't exist anymore I guess um and like six months later after pitching like everybody some guy shows up in in uh in uh in Tokyo and he is from Fortress and looking to potentially buy claims so yes later on Fortress showed up later in 18 um they showed up but I think it's because we're pitching all over town and the guy that works at Fortress his brother works at the place called fulcrum Securities which is like a distress brokerage so I think he got wind of us like pitching this trade all over town um but nonetheless yeah they showed up later in the in the trade and then they

bid we were bidding like four or five hundred per claim they bid like six seven eight nine hundred per claim so they still got and they they put a lot more capital on but at like double triple price as to what we paid how many how many creditors or how many folks I don't even know the right language to use here how many folks have yeah how many original creditors yeah so 14 000 about 14 000 creditors so when you look at uh Celsius Voyager and FTX it's like nothing right 14 000 creditors that's nothing I mean you're talking about in in those cases it's hundreds of thousands of creditors um and how many creditors are there now or how many because because those have been Consolidated into you know 507 I

bought them fortresses bought them how many are there it'd be hard I don't I'm sure you could find out by going to the Japanese court because you can go and see the documents in person apparently like the Creditor list at least um we've never taken the time to do it and you can't transfer claims now anyway so it's kind of irrelevant um but uh I don't know but they bought at least 10 of the docket um so I don't I think they bought the larger ones so there's probably a lot of there's a lot of really small predators of Mount Cox um just like in if you looked at Celsius and Voyager there's a lot of like bifurcation if you looked at the top like a thousand you know customers versus the bottom ten thousand maybe

like nothing versus like a huge yeah yeah big powerless way but but um there's a there's a big challenge with its own By Us by Fortress by bitcoinica and so if you look at those three blocks and you sort of think of even other Brokers have probably bought stuff uh there's a decent chunk probably a third of the docket that's been bought up by claim buyers so I think there's a fear that when these actually get paid out that's going to tank the market because so I'm just curious like hey when when does the mailbox Bitcoin actually get paid out how much is it gonna how much is actually going to get paid out and then see yeah and then see like will you what

do you plan on doing with that Bitcoin will you sell it immediately will you hold it and how much like what's the impact on the market so kind of a three-part question there I have kind of a differentiated view I guess because I'm so close to it that I kind of think that anybody that sold all the weekends have sold like that's one thing and in addition that if you think about the money coming off there are a number of pockets that are going to go to with people that have extremely low basis and so when you have a super low basis what I've realized in crypto or probably any asset you start thinking of ways to re-apothecate without generating taxes and so I think a lot of big holders of whales in that case are thinking like okay either they already sold they moved to low tax

jurisdiction and they sold or they're holding and when they get it the first thing you're going to do well hopefully Genesis is still around but Genesis they're going to call Genesis they're going to call um you know Unchained capital or you name the lender and they're going to be like hey I have 40 million dollars in Bitcoin I'd really like to you know borrow against it so I'm not saying that's what we'll do because ours is totally different it's all client money it's going to go to the clients the clients figure out what they do we get our cut as a promote but um but for a lot of the OG guys that held on to their Bitcoin that's what they'll do and then bitcoinica is kind of interesting because they're a large predator and they're not going anywhere the bitcoinica state is going to take

another three to five years after Mount Cox pays out so it's not like all that money's gonna hit the market in fact a number of those pockets of the market are going to be pulled offline because not going to come online a lot of the whales aren't going to come online and I don't know really what Fortress is going to do I heard that they hedged but I just don't know it's like so rumor-ish I mean I speak with the guys there from time to time or the guy that sort of Point guy on the trade for them from time to time but I can't really make heads or tails of it he doesn't want to tell me and he shouldn't he didn't have to tell me he doesn't you know it's not he should do his thing but I I it would be hard for me to believe that

they would just dump it on the market then hedging or selling you're using their balance sheet and selling ball against their position I think is probably what they might have considered or done but I don't think they're just gonna dump it on the market anything else in the timetable yes yes okay so what we hear and this is you know just from participants I shouldn't say who they are because it would kind of give away you know stuff they probably don't want that's out there so we have heard early payouts so these are people that decide for early payouts they get a lower cut so technically you get like a 21 payout if you do an early payout you get like a 23 pass you do a late payout or final payout so we've all done the

fine we've done all the final payouts so that's what our investors wanted for us so for early payouts we've heard early 2023 and for late payouts we've heard late 2023 early 2024. um so every year it's like okay come on this is gonna happen so my wife I you know I'm married and my wife uh at this point I sort of stopped talking about it because I'm just like you know what one day it's gonna happen but so every year it's it's the next year that's what I should say it's not because it's crypto well it's not because it's crypto it's because it's because it's Japan has nothing to do to crypto it's it's every it's every bit of a fault of the

Japanese legal system which if you ever go to a credit meeting you'll know what I mean which is you sit there they don't ex they don't there's no arguing there's no motion practice like you've seen the states it's just the trustee comes out he tells you what's going to happen and the judges literally that the trustee sits in the middle the judges sit on the side and they nod while the trustee talks so it's very a weird system all right everyone time for a quick word from Circle and uscc as a crypto user you know the power of stable coins dollar digital currencies that transcend borders banking hours and Legacy Financial rails while circles usdc has quickly become one of the most trusted and widely used stable coins it's simple people use usdc because of its

composability its stability and its Reserve transparency and uscc isn't just adopted by a few of us defy degens and Dows and nft marketplaces crypto companies alike they all leverage usdc to diversify their treasury asset management and ecosystem-wide composability the adoption's clear usdc has grown to more than 50 billion dollars in circulation since launching in 2018. we all have and we all will continue to take shots on our favorite volatile crypto assets obviously but usdc is one of the easiest ways to store your funds in a stable asset that can be used to send value around the world World almost instantly it lowers the cost of cross-border payments it

integrates into the growing ecosystem of crypto apps as a seamless trusted dollar digital currency usdc is a zero to one opportunity for the financial system if you want to learn more about usdc I would recommend you check out the recently published transparency Hub on circle.com it's a great update to circles content on usdc it outlines everything from links to their weekly Reserve reports monthly attestations blog posts that are written by their exact team that highlight how and why usdc was built so it is really recommend it just go to circle.com backslash transparency to access it now let's get back to the show all right so let's fast forward from Mount Cox to this year so we've got Tara

we've got Tara and Luna then we also have three arrows we also have Celsius let's play in like that May June bucket of this year where did you see room for opportunity so Celsius I didn't really wasn't trying to buy claims and then uh you know fast forward then uh I think Voyager had filed a few weeks earlier and we sort of watching the two dockets and it was kind of interesting and every now and then someone would call us with a claim or someone call us about something and then I had a few friends because I knew all these people from crypto from Cox and if your friends that were tied up in claims now give them a little advice here and there and then I started think like you know what these are interesting but these are all like customer accounts I don't really want to

get involved with customers I don't want people to think I'm like sniping claims like I'd rather just like get my get my sort of uh profile out there by being involved in these communities but the same time really look for private deals you know traditionally you would have mpls and um you know non-performing loans and like any distress cycle you'd have non-performing loans like people trying to sell assets cheaply and other opportunities tertiary things that don't have to be like the big public dockets so I started focusing on that and then when FTX sort of was boiling up and fuming I was really working on these like private loan restructurings and then when FDX happened I was like whoa this is like a big boy situation

and a lot of people started calling and a lot of claimant started calling and big claim it's not like small claim it's big claimants and so we started trying to look to deploy capital and trying to see if we could get involved and uh there's a lot of nuance between the different cases and I'm happy to talk about them but that's how I got sucked into the recent um Rod of things that are public who who are the big players that are that are calling the big players I mean basically every distress firm uh wants to be a part of this distress cycle in crypto which is good to see because I suppose it's part of the ecosystem um you can't be mad at them in fact you need them like they're the opportunistic capital that comes in when no one will touch anything

um but the value the Delta evaluation between what they will pay and the the VC firm will you know like what the GARP investor will pay versus like the opportunistic like credit investor will pay that's like a golf so people get really scared in that like big move uh but um it's nice to see that they're showing up but of course they're still getting tooled up I mean I'm flattered that they would call little old me and ask me like you know about crypto or stable coins or FTX or whatever and uh but I guess it's kind of like it's kind of it's It's I'm flattered that it's happening um uh I kind of thought it would happen and

I'm glad to see that you know I wasn't totally wrong but I don't want to see like total Destruction I mean you know especially when it's like individuals I mean I think in FDX is weird because it's all professional Traders and of course I feel for people losing their money that they've worked hard to earn but you know in Celsius Voyager the stories were even worse I mean especially in Celsius for some reason there was a lot of personal stories that I came across with people that were severely impacted like financially you know people that were just trying to save save there for retirement things like that it's very very different in in FTX it's a lot of professional trading firms and professional Traders so when you when you bid on something it I guess if I don't know how much

I don't know how much you want to talk about like what what you're actually bidding on so so Celsius have have you bid on Celsius I've been on a few claims I've been on a few big claims uh normally we're not actively soliciting but if someone's a really big claim I'm like look we're not really bidding but you have a very large claim it's like 16 million dollars so if you ever wanted to sell it like please like consider us like I would try my best to give you the best price and if someone gave you a better price I would tell you hey go take that price I can't match it and like so the way I positioned myself is like hey I can help you make a market and get the best price and if that guy is giving you crappy

documents maybe I could be better documents but the same price or lower price or the same price but better documents so I try to position myself as like I'm just part of the ecosystem so there's no reason not to involve me and I like to think I'll be totally straight with you and transparent and um hopefully be able to help but for smaller claimants like we really try not to get involved I mean for myself there was a time when I was quite involved in the community and I still am happy to answer anybody's questions if they DM me I really try to respond um or on like Telegram and things like that and so I do feel a responsibility to do that um but I try not to be too aggressive with like you know like hey and I definitely don't do the whole like

aggressive like oh you're gonna lose all your money you don't know what you're doing like I hate that kind of sales pitching stuff and we really stay away from that um in a voyager the same we're not actively buying claims but there's been one or two that have popped up in some weird way like one was position on a Marketplace that my friend runs and I saw it and I was like wait dude what are you doing with a claim on a C5 like exchange like come on man and he was like oh it's so easy I love using the app like it's just so easy it's not a lot of my money but of course like it's just easy to do it and like you know that's that's my life like I don't have time to like like private Cold Storage everything and uh I was like well dude I

would totally buy this and so we kind of negotiated it off the platform and then I went back off I don't want my friends to not make their fee so I was like okay I'll buy it on the platform so but we're not active we don't actively search it but if someone has a whale claim like we'll consider it and I'm always also happy to like facilitate like people you know to the right buyer and and the way that that works to just to again simple questions here uh for a complex thing is the way that that works is let's say someone has a 100 let's say someone has a claim on a hundred million dollars of Celsius assets those are assets that may or may not come back to them 100 million dollars that they have a claim on you will tell them you will

put in a bid for that so you'll say hey uh I think there's a 10 I think there's a 50 I personally think there's a 15 likelihood that those that that Capital comes back so the value of those assets in my mind are 15 million I'll put in a bid at like 10 million 10 million dollars is that roughly how it works yes I'm normally very transparent with people about what I think the recovery is and then I just tell them like this is going to take this long and I need to get a discount to that and there's also risk so let's take I mean we can do Celsius Celsius maybe it's like high 30s low 40s so what can I pay for that High Teens high 20s low 20s sorry low 20s maybe mid 20s maybe but uh the FTX connections I need a discount so maybe

let's say the return is 35 cents in the dollar which is not that far off probably what they are 35 and what's the timeline what's the timeline there it's hard to say right now there's been a lot of smoke or you know uncertainty with the FDX filing but there's no reason like if Celsius can't find a buyer which I highly doubt they will find a buyer at this point I mean maybe CZ shows up and buys them but I think they probably just lets him liquidate um maybe he shows up and buys it because I mean think about it like if you buy FTX or excuse me if you buy Celsius or you buy Voyager it's basically like a customer acquisition strategy like can I buy this cheaper or can I can I can I build this and acquire these customers

for a thousand dollars a customer or can I just acquire them by buying this platform so I don't know if there's a buyer at this point I think a Trad file institution should show up in these cases but I thought that early on with Celsius or excuse me with voyager and then when I got deeper into talking to try to find people about bidding on Celsius and Voyager they all looked at me like I was crazy and they were just like what like I don't even know like we don't have an operating team like we don't know about crypto so maybe as things get deeper uh they consider it but it's not gonna be for high numbers it would just be like for liquidity purposes so maybe Celsius takes another year before they start Distributing crypto and it would be in drips and drabs like it would be like a

five percent dividend and then like a 10 and another 10 so the 30 or 40 you could get could take like next year you get 10 and the year after you get another 10 and the year after that you get another 10 you follow me so if they if no one buys them and they just liquidate it could be a multi-year distribution pattern and you let's let's fast forward to FTX you already started buying um claims on FTX yeah for I think I saw three cents on the dollar huh I mean we got very lucky with that one that's not something that could be repeated um but yeah the market right now is probably five to six cents um with a premium for large and a premium for better how did you get that how did you get that Thomas like someone

just calls you up and they're like Hey Thomas I know that you're a distressed investor it's just luck man it's just like you're in the market it'd be like trying to get I don't know a sponsor or something it's like oh it worked out like they got dropped from this event and then they said this so they have this allocation so they had to use it or lose it so the so now I got a hundred thousand dollar sponsor it's literally that it's like preparation meaning opportunity so what what's uh what are the claims trading at right now in the secondary you said five to eight cents five to eight probably the tighter range is like five to six for smaller claims and probably like six to eight for larger claims and it also depends on a few things what jurisdiction you're in

how clean your claim is in terms of its documentation preferences of look in clawback potential even though there's probably no clawbacks and then also like what documents you want so a few sellers have been like oh I want really aggressive privacy stuff and I I don't want to sell to us entity that's one thing I've heard oh I don't want to I want very aggressive red lines with like very aggressive red lines and it's like okay that's fine just so you know that affects price you know like you can't get eight cents you can't get seven cents for a big claim if you want ridiculously aggressive red lines to to when I say red lines red lines to a contract between the buyer and the seller

it affects them and I'll be like a sponsor you know it's like you you want all these things okay well that's gonna cost you a little more you know it's like yeah no no yeah that makes sense um yeah the pick here you are the the more expensive expensive obviously it's going to be um how much of this do you think about like where things are domiciled so so I again I'm not a lawyer here but you know FTX was operating out of the Bahamas the bankruptcy as I understand is happening in the US and then they have some like the trust is in England some something like that like how how much does the location come into play here okay so it's English law which is not that surprising because it's uh the originally my understanding is so originally it was uh and Tegan and Tegan

and Barb Buddha if I'm saying it right so that was some reason moved to the Bahamas it's quite curious why it was moved I'd love to learn and I'm sure that they'll find out as they go through investigations why it was moved it might have been some pushback from the authorities about wanting to see audited financials and things like that um or regulation that they didn't like um but maybe it was innocent and there was no reason maybe it was just like oh you know let's just move it because it's easier and Bahamas was giving us all these free tax breaks or something who knows um but I was quite curious that it was moved but in both instances they were basically this is not that unusual but for these sort of offshore you know previous commonwealth countries or even

commonwealth countries that will use English common law or English law as the jurisdictional backdrop I mean as an American a lot of times people will especially claims trading people use New York law because what you're doing is you're looking for certainty and interpretation of of your agreement so with English common law there's a lot of you know or English law there's a decent amount of certainty about what you're going to get you don't want to say oh let's subject ourselves to Bahamian law like there might not be a lot of certainty and so you you look for jurisdictions where you have certainty and so it's not that uncommon to see English common law in contracts and this one is English common law with Singapore arbitration which again is not that uh unreasonable or suspect do you think we

could see something that something similar to what bitfinex did where they I don't even fully understand what bitfinex did they like tokenized their tokenization of like bankruptcy assets something of that sort so maybe if you could I don't know what if you know much about what bitfinex did but maybe you could explain what they did and then yeah yeah they basically took it they did like a debt for Equity swap but instead of I don't know I don't remember how they passed it by the creditors maybe they just all voted on it I don't actually know but law jurisdiction or what jurisdiction they used but um they're never gonna they're never going to

um that's never going to happen in these cases now there could be a debt for Equity swap as part of the bankruptcy and then someone could tokenize it or even the bankruptcy courts could sanction the idea of tokenizing it but um they're not I don't have to uh it won't happen in the sense of the way they did it in bitfinex I'm not saying they couldn't do a recovery token because again a debt for Equity swap is all all the it's very reasonable thing to be doing um but it would have to be sanctioned by the bankruptcy court there's no way the estate professionals aren't going to do their full investigation into what happened pre-petition um before

um that would be that would be happening and even then I just don't see bankruptcy estate professionals going for a tokenization model unless it's really pushed for by the creditors in FTX I've heard there's been a lot of talk but again it's a lot of professional Traders unlike Celsius and Voyager where people are like very I don't know how to put it but there's there's a very different component going on there's a lot of emotional components where people were individuals that lost a lot of money and they get behind leaders that have different ideas and I think a tokenization uh would be interesting in almost all cases but that's not too different than what the bankruptcy courts have been doing for years which is in the.com bubble there

was two famous bankruptcies one was CMG I and I don't know if that actually filed for bankruptcy or just went into receivership into the liquidation but the other big one was commisco so in com disco it was a computer leasing company as part of that they had this big two billion dollar Venture portfolio and they they didn't tokenize it but think about what they did they basically issued like a recovery certificate like a unit there was a liquidation trust and a litigation trust I think in one and that traded OTC like over the counter um in America you could buy it in your Fidelity account um and so you could almost do it it's kind of like a token uh with a registered security so I don't think

that's out of the picture I just think that that's two three years off in fdx's case at a minimum and I think yeah it only makes sense if you want to do it for the Venture portfolio for Celsius and Voyager it doesn't even make sense because what would you be tokenizing like new co-equity I'm not sure the the new co-equity has that you value it needs to be either sold or so I think it's better to just liquidate what's the name of the second company that had the Venture portfolio from the.com so calm disco is a big one see that's a that's an interesting comparison to FTX because from my understanding of that of that bankruptcy The Venture portfolio ended up actually

returning yes the amount that made that made the creditors whole which I did actually you know has this huge Venture portfolio it just took them like a decade to return the amount of capital that made the creditors whole so you could see yeah it took 14 years so you could see the Venture the FTX Venture portfolio eventually making everyone whole but you just gotta wait you know 10 to 15 years here so so I I wish someone would write a case study on it and someone out there must have done some research on it the problem is like I'm too young like I only I'm not that young but I wasn't really around com disco I only remember when the liquidation trust traded and I remember being like holy

crap these guys made over 100 of the return it's in year like 10 and I remember I mean I invested when I ran my hedge fund from like year 10 to 14. I played the liquidation and it was still cheap I made a double on the liquidation if I recall I mean it was a double over four years but it was not a bad play at all so hmm that's really interesting anything else that we're missing here that you think is really important to to talk about in terms of just to stress investing what you're looking at with FTX Celsius anything that we're missing here there's gonna be a lot more litigation in FTX than probably Voyager pittance for litigation uh Celsius a little bit more maybe because some Insider transactions and

some structuring and gifting of tokens to girlfriends or wives and things like that but that's actually small compared to FDX I mean FDX like holy crap like this guy basically took trust assets and invested it and all kind of stuff and you know I'm not I mean you know I I guess in this instance like he's gonna it's gonna be you know you're gonna have to you potentially are gonna have to trace trust assets and there's people talking about bringing actions outside of the bankruptcy court and the Singapore arbitration which is possible it's not part of the automatic stay um will they separate FTX us and ftxu Aston FTX International assets they will

separate them very likely yeah what about um Thomas the one company you haven't mentioned is block five what happens to block fighter so I don't know exactly what the blackfy agreement was but my understanding for the most part was they paid nothing for the equity and they basically gave them a line of credit um so that line of credit's clearly going to be called and so blackfy is going to have to file for bankruptcy but the question is like is the underlying loan portfolio solvent if it is then all it needs is time to mature and they could just eat the call on the loans or get someone to buy the loan portfolio out and the maybe they can buy the equity of the business for next to nothing but the creditors themselves in Block fight might be fine I haven't heard anything about the loan

book being sour unlike a Genesis where I I yeah it sounds seems like the loan book is very sour um like there are some loans that were in hindsight not well thought through or underwritten I guess it's the right word yeah that was the last place I want to end with this conversation is actually just with Genesis um I mean just to timestamp this we're recording this November 21st it's like four in the afternoon time stamp it um yeah what uh because things are moving so quickly um especially 48 hours so they file what's the question and I was just going to say like what do you think over under and how many hours

did they file yeah yeah exactly exactly um I mean so blackby has the file it's not their fault like they got bought by a company that now isn't solvent so they have really no choice um Genesis I don't know I thought that Genesis Lending was sort of siled and I used to think of various turns Sterling cerlick however you say his name I think you think of Barry is like kind of a genius um that there's no so that he would cross very silver thank you Barry silbert is like a genius and like there's no way he cross-contaminated his balance sheets but then I heard stuff on Twitter about people saying like oh well you know dcg guaranteed some billion

dollar loan to the sub if that's true that's bad um and it does complicate things but the guarantee would take a long time to call in versus filing the sub and then somebody calling in the guarantee and then you finding the guarantee for six months or 12 months or whatever but it would be bad it's bad for sure so I don't really know I'm not like I don't like not don't have some special knowledge about uh Genesis if in a perfect world let's say they're all siled um Barry basically files Genesis Lending in the worst case scenario if Genesis Lending and Genesis trading are combined balance sheets he files both those

entities but dcg group itself should be fine the Venture portfolio just the other Investments that they have and things that the hold Co and things like that so so on in a perfect world that's what it looks like but I've heard some stuff on Twitter I don't know if it's true about there being like a guarantee from the parent to the sub whoever put in capital last time so I don't deny or confirm I I have no special knowledge on it it'll be interesting to see yeah it was interesting indeed awesome man this was a uh anything else that we're missing here I feel like this is a good place to wrap but anything else that we're missing no that's that's pretty much it man there's a lot to see what will happen over the next couple of

months cool all right man well always good catching up appreciate your time and uh I will see you on the other side of all this [Music]