FTX Creditors Eye SpaceX’s Soaring Valuation for Potential Recovery
Customers who suffered losses from the collapse of cryptocurrency exchange FTX are closely monitoring the performance of SpaceX following its initial public offering. Elon Musk’s rocket company has significantly surpassed its initial market valuation of $1.77 trillion, and its strong debut on Wall Street has bolstered hopes among those tracking FTX’s bankruptcy proceedings that creditors might recover more than initially anticipated.
Sunil Kavuri, a British investor who lost approximately $2 million in the FTX implosion and has become a prominent advocate for other victims, told Decrypt, “It’s always great news to see good investments that could aid in the recovery and payment to FTX creditors.”
FTX’s bankruptcy estate did not immediately respond to requests for comment.
Months ago, Barbara Fried, mother of FTX co-founder Sam Bankman-Fried, noted in a blog post detailing her son’s story—he recently lost an appeal to overturn his 25-year prison sentence and fraud conviction—that the defunct exchange had already distributed $10.3 billion to customers.
She referenced projections from Kyle Schmidt, a creditor advocate known as “Mr. Purple.” Schmidt estimated that final distributions could reach 171% of claims for customers with claims exceeding $50,000. This figure reflects a surplus generated from the liquidation of the estate’s assets and accrued interest.
“Schmidt suggests that one notable investment […] is likely to yield significant proceeds this year,” Fried highlighted, referring to FTX’s investment in SpaceX through the venture firm K5 Global.
Settlement with K5 Global Aims to Maximize Recoveries
In January of last year, John J. Ray III, CEO of FTX’s recovery trust, announced a settlement with K5 Global. This agreement resolved a lawsuit initiated by FTX in June 2023, with both parties agreeing to collaborate on maximizing recoveries for FTX stakeholders.
The lawsuit sought to reclaim $700 million in transfers that the defunct crypto venture allegedly made using misappropriated funds. K5 Global continues to list SpaceX in its investment portfolio.
“It is clear that K5 is a bright spot in the FTX portfolio,” Ray stated. “The expected strong performance of their investments will be a key driver in the recovery efforts.”
Decrypt did not receive an immediate response from K5 Global regarding comment.
While the defunct exchange has not yet commented on SpaceX’s Wall Street debut or the potential benefits for creditors, Kavuri pointed out that the bankruptcy estate would be required to disclose any sale of stakes in K5 through court filings.
FTX’s Exposure to SpaceX Traced to Venture Capital Investments
Prior to his conviction, Bankman-Fried was accused of misappropriating over $8 billion in customer funds. These funds were allegedly used for political donations, real estate purchases, and venture capital investments.
During his criminal trial, Bankman-Fried attempted to argue for leniency based on the success of his investments, which included stakes in Robinhood and Anthropic. However, the presiding judge rejected this defense, comparing the former crypto mogul to “a thief who takes his loot to Las Vegas.”
FTX’s exposure to SpaceX originated from a relationship cultivated between Bankman-Fried and Michael Kives, described as a “super-networker” and co-owner of K5 Global alongside Bryan Baum, according to bankruptcy filings.
The filings indicate that Alameda Research, FTX’s sister trading firm, transferred substantial sums to a K5-affiliated entity. Before FTX’s collapse in November 2022, one of K5’s funds had invested $190 million in Elon Musk’s rocket company.
In 2022, SpaceX raised $1.73 billion at a post-money valuation of $125 billion, months before Bankman-Fried was accused of orchestrating a multibillion-dollar fraud, according to Forge.
Although this estimate does not account for shareholder dilution, Kavuri suggested that FTX’s stake in SpaceX is likely worth several billion dollars, based on the company’s current market capitalization. On Wednesday, SpaceX’s market value surpassed $2.52 trillion, according to Yahoo Finance.
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