An FTX customer has sued Olympus Peak, a hedge fund that purchased his claim in the bankrupt cryptocurrency exchange.
The customer, Nikolas Gierczyk of California, alleges that Olympus Peak underpaid him and can gain more than $1 million from their agreement. Gierczyk sold his $1.59 million claim to the hedge fund last year at what he says was a 42% discount.
Now, Gierczyk contends that Olympus Peak owes him a larger payout after FTX received approval for a bankruptcy reorganization plan expected to repay customers between 129% and 146% the value of their claims.
According to the complaint filed Thursday in federal court in Manhattan, Gierczyk negotiated an explicit right to additional recovery in his agreement with Olympus Peak. He claims the fund has refused to honor this provision.
Olympus Peak did not immediately respond to a request for comment from Decrypt.
It is common for hedge funds to purchase claims for distressed assets at a discount. The claimants get a quick payout and the hedge funds are in a position to wait out the often lengthy bankruptcy process to eventually cash in more than they paid for the claim.
Gierczyk, the FTX creditor, asserts that under his purchase agreement, Olympus Peak agreed to buy from him, at the same 42% rate, any excess distribution from the bankruptcy. The agreement reads:
"If the Claim is ultimately allowed [...] in an amount that is greater than the Claim Amount (such additional amount is the 'Excess Claim Amount'), Buyer will purchase such Excess Claim Amount by paying [...] an amount equal to the Excess Claim Amount multiplied by the Purchase Rate."
Unusually for bankruptcy cases, FTX has accumulated billions of dollars more than needed to cover customer losses from its collapse in November 2022, mainly due to a strong crypto market over the past year.
A bankruptcy judge approved FTX’s restructuring plan on Monday, clearing the firm to begin plans for redistributing about $16 billion.
Edited by Stacy Elliott.