FTX Customer Sues Hedge Fund Over Bankruptcy Profits

A former FTX customer, Alexander Nikolas Gierczyk, is suing the hedge fund Olympus Peak. He accuses the firm of failing to honor an agreement for additional recovery after selling his claim in the collapsed crypto exchange. 

According to a Bloomberg report, Gierczyk sold his $1.59 million claim with FTX in November 2023 at a 42% discount to Olympus Peak but now alleges the firm owes him more based on recent developments.

Gierczyk Sues Olympus Peak

In a legal complaint filed Thursday in the United States District Court for the Southern District of New York, Gierczyk, a California resident, alleges that Olympus Peak underpaid him for his claim. He contends that the hedge fund may receive a larger recovery following a U.S. bankruptcy judge’s recent approval of FTX’s reorganization plan.

According to the filing, the restructuring plan outlines repayments for FTX customers ranging between 129% and 146% of their claim’s fiat value at the time of the exchange’s bankruptcy. If the recovery rate reaches 100%, Olympus Peak could receive around $670,000 on the claim. At a 129% recovery, this amount could rise to approximately $1.1 million; at 146%, it may increase to $1.4 million.

Gierczyk claims that despite selling his claim at a discount, the deal included an “excess claim provision,” entitling him to additional recovery from FTX’s bankruptcy. He asserts that Olympus Peak has refused to honor this part of the agreement.

Hedge funds commonly purchase claims in distressed assets at a reduced price, offering immediate payouts to claimants while waiting for the bankruptcy process to yield potentially larger recoveries.

Former FTX Executives Sentenced

The defunct crypto exchange FTX filed for bankruptcy in November 2022, and its former CEO, Sam Bankman-Fried, was convicted a year later on seven criminal charges, including wire fraud and conspiracy to commit wire fraud. He was sentenced to almost 25 years in prison.

Similarly, Caroline Ellison, former co-CEO of Alameda Research, was sentenced on Tuesday to two years in prison for her involvement in the collapse of FTX.