SpaceX Surge Could Be Worth Billions for FTX—Will Creditors Benefit?

Some customers hurt by the collapse of crypto exchange FTX under co-founder and former CEO Sam Bankman-Fried are keeping a close eye on SpaceX’s post-IPO performance.

As Elon Musk’s rocket maker has soared well beyond its initial market value of $1.77 trillion, the company’s debut on Wall Street has raised hopes among those following the stock exchange’s bankruptcy proceedings that creditors could walk away with more than previously expected.

Sunil Kavuri, a British investor who lost about $2 million in FTX’s implosion and has become a vocal spokesman for Bankman-Fried’s other victims, said Declutter that “it is always great news to see good investments that can help with recovery and payment to FTX creditors.”

Declutter contacted FTX’s bankruptcy estate for comment but did not immediately receive a response.

The defunct exchange has handed out $10.3 billion to customers, Barbara Fried noted months ago in a blog post which is dedicated to telling the ‘untold story’ of her son, who recently lost an attempt to overturn his 25-year prison sentence and fraud conviction.

She quoted projections from Kyle Schmidt, a creditor advocate known as “Mr. Purple,” which estimated that final distributions could total 171% of claims for clients who had claims above $50,000 – a figure that reflects a surplus resulting from estate liquidations and accrued interest.

“Schmidt suggests that there is a remarkable investment […] will likely generate significant returns this year,” Fried emphasized, referring to FTX’s SpaceX investment through venture capital firm K5 Global.

In January of last year, John J. Ray III, CEO of FTX’s Recovery Trust, said, revealed a settlement with K5 Global that resolved a lawsuit the exchange filed in June 2023. Both parties agreed to work together to maximize recoveries for FTX stakeholders.

The lawsuit sought to recover $700 million in transfers the defunct crypto firm allegedly made with embezzled funds. K5 still shows SpaceX his wallet.

“It is clear that K5 is a bright spot in the FTX portfolio,” Ray said in a statement. “The expected strong performance of their investments will be a key driver of recovery efforts.”

Declutter contacted K5 for comment but did not immediately receive a response.

The defunct exchange has yet to comment on SpaceX’s Wall Street debut — and whether creditors can actually benefit from it — but Kavuri noted that the bankruptcy estate would have to telegraph the sale of shares in K5 through court filings.

Prior to his conviction, Bankman-Fried was accused of stealing more than $8 billion in customer funds. In addition to using the money to make political donations and purchase real estate, Bankman-Fried also misused funds through venture capital investments.

During his criminal trial, Bankman-Fried sought leniency for the success of his investments, including Robinhood and Anthropic. Nevertheless, the chairman rejected his argument, to compare the former crypto magnate to “a thief who takes his loot to Las Vegas.”

The defunct exchange’s exposure to SpaceX stemmed from a relationship between Bankman-Fried and Michael Kives, a “super networker” who co-owns K5 Global with Bryan Baum, according to bankruptcy filings.

The documents note that Alameda Research, FTX’s sister trading firm, transferred huge amounts of money to a K5-affiliated entity, and — before the stock market collapsed in November 2022 — one of K5’s funds invested $190 million in Elon Musk’s rocket maker.

SpaceX raised $1.73 billion that year at a post-money valuation of $125 billion, months before Bankman-Fried was accused of orchestrating a multibillion-dollar fraud, according to Forge.

While the estimate does not take into account shareholder dilution, Kavuri said FTX’s exposure to SpaceX is likely worth several billion dollars based on the company’s current market capitalization. On Wednesday, SpaceX’s market value rose above $2.52 trillion Yahoo Finance.