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Former FTX Customer Says Hedge Fund Reneged on Bankruptcy Payout Deal

Alexander Nikolas Gierczyk of California says the hedge fund he sold his FTX bankruptcy claim to isn’t paying out what it promised.

A California-based former customer of FTX is suing hedge fund Olympus Peak alleging that the firm’s bankruptcy claims purchasing desk has withheld promised payments on a claim he sold to it.

In documents filed with the U.S. District Court Southern District Of New York, Alexander Nikolas Gierczyk says he agreed to sell a $1.59 million FTX bankruptcy claim at a 42% discount to Olympus Peak Trade Claims Opportunities Fund with an “excess claim provision.”

The agreement provided that “if the Claim is ultimately allowed … in an amount that is greater than the Claim Amount, Buyer will purchase such Excess Claim Amount by paying … the Excess Claim Amount multiplied by the Purchase Rate.”

Gierczyk agreed to the sale only because “the purchase agreement contained a clause that expressly gave him the right to receive additional recovery in the event his claim was paid above par through the bankruptcy proceedings,” according to the filing.

Gierczyk’s attorneys write in the filing that the most recent FTX disclosure statement says that claims similar his are estimated to receive as much as 146% of their value in distributions. But, they allege, Olympus Peak, “made clear that they would not be fulfilling their end of the bargain.”

“We disagree with your position that you have a retained any economic interest in the claim,” an Olympus Peak representative wrote to Gierczyk.

Olympus Peak did not immediately respond to a request for comment from CoinDesk.

In the early days of FTX’s bankruptcy, claims were going for 13 cents on the dollar on bankruptcy marketplaces.

Bloomberg reported on the case earlier.

Attention Bitcoin Bulls, China Stimulus May Have Lost Its Mojo

According to BCA Research, generating large bullish “credit impulses” is now a tough task for China.

China has recently unveiled a raft of stimulus measures, the biggest since 2008, torching a rally in Chinese stocks and risk assets worldwide, including bitcoin. Most crypto analysts expect the Chinese stimulus and the Fed rate cuts to power bitcoin (BTC) to $100,000 in the coming months.

However, BCA Research argues the risk-on rally may not have legs as China’s latest stimulus falls short of generating significant bullish “credit impulses” as it did in the past two decades, including in 2015.

Credit impulse refers to the flow of new credit issued through loans and other debt instruments as a percentage of gross domestic product (GDP). Since the 2008 crash, analysts have closely tracked China’s credit impulse as a leading indicator of economic growth and risk-on rally worldwide. Renewed upswings in the indicator have historically coincided with bitcoin bear market bottoms.

The credit impulse peaked at 15.5 trillion yuan during the last major bullish easing cycle dated 2015, equating to 15% of the GDP. Back then, the Chinese stocks, represented by the CSI 300, more than doubled in six months and BTC found a bottom near $100, turning higher for a two-year bull run that peaked near $20,000 in December 2017.

Since then, China’s economy has doubled in terms of nominal GDP, which means the credit impulse during the current cycle needs to peak at 27 trillion yuan to have a similar bullish impact on the economy and markets.

However, the most recent peak in the credit impulse was less than 5 trillion yuan. So, to match the 2015 episode, the latest measures would “need an amplitude five times greater than the most recent peak,” BCA Research said in a note to clients on Oct. 2.

Reversing the downtrend in the credit impulse might be easier said than done because factors that drove it higher initially, such as the housing market boom, are no longer present.

“Through 2000-2020, when China’s housing boom was in full swing, it was possible to channel the exponential credit curve into the housing and construction boom, But now, absent an alternative destination for the productive use of credit of the same magnitude, it will be difficult to generate those same monster credit impulses,” BCA’s analysts said.

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