FTX user sues: Could be big!

Alexander Nikolas Gierczyk, a former FTX customer who sold $1.59 million worth of receivables to hedge fund Olympus Peak at a 42 percent discount, is suing the company, claiming the company reneged on an additional compensation deal.

In a filing in the U.S. District Court for the Southern District of New York on Thursday, the California resident claims Olympus Peak underpaid him and that he stands to make more than $1 million from the settlement after U.S. bankruptcy judge John Dorsey recently approved FTX’s reorganization plan.

The estate’s plan is expected to repay FTX customers between 129 percent and 146 percent of the value of their claims at the time of bankruptcy. If Olympus Peak had repaid the claim in 100 percent fiat money, it would have made about $670,000. But at a 129 percent payout ratio, the hedge fund could make about $1.1 million on the claim and $1.4 million at 146 percent.

Gierczyk said that despite selling at a discount, the deal with the Greenwich, Connecticut-based hedge fund included an “excess claims provision,” which would have given the claimants the right to additional compensation at the same rate for any excess distributions resulting from the bankruptcy.

Hedge funds typically buy claims on problematic assets at a discount, allowing them to quickly pay out the claims while potentially expecting a larger recovery through the bankruptcy process.

Gierczyk claims that he agreed to the sale because the provision only applies “if the claim is paid in excess of what is normal during the bankruptcy proceedings.” But the plaintiff’s lawyers claim that Olympus Peak “made it clear that they would not honor their end of the bargain.”

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