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Institutions seek uncorrelated assets after 2022 losses in stocks and bonds

Genesis, a division of Digital Currency Group, now also has clients selling their bankruptcy claims to cut their losses and move on rather than waiting for the bankruptcy process to unfold.

Institutional buyers are betting that heavily reduced creditor claims on Genesis, FTX and others will pay off. Currently, FTX customers can get 15 cents on the dollar for claims, according to online trading marketplace Xclaim.

Crypto customers have listed claims there totaling more than $200 million, and the total market equates to around $30 billion in claims against companies including Genesis, Voyager, Celsius, BlockFi and others, the report said. Xclaim founder and CEO Matthew Sedigh in an interview.

Specialty brokers advertising trading FTX and other crypto claims include Seaport Global, Jefferies, Citigroup and Xclaim.

The bankruptcy claims business “came fast and furiously. These are big cases with millions of users,” Sedhig said. Over the past month, the exchange has traded around $200 million in claims on FTX, Celsius, BlockFi, Voyager Digital, and Genesis.

About 300 institutions have signed up to buy and sell debt, including hedge funds, banks and family offices, including one institution with an FTX account balance of $500 million. Currently, FTX bankruptcy claims are trading between 12 and 15 cents on the dollar.

Pension funds have so far avoided the bankruptcy market directly, although their investments in the underlying funds may be investors.

For example, venture capital and private equity funds and companies that have invested directly in FTX include Institutional Venture Partners XVII, Lightspeed Venture Partners and others. Pension funds that have invested in Institutional Venture Partners include the $60.7 billion Illinois Teachers’ Retirement SystemSpringfield and the $40.8 billion Texas County and District Retirement SystemAustin. Lightspeed Venture Partners funds raised $47.3 billion Illinois Municipal Retirement Fund, oak stream; Texas County & District Retirement System, Austin, $173.3 billion Texas Teachers’ Retirement SystemAustin and the $89.7 billion Michigan Retirement SystemsEast Lansing.

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