- January 8, 2024
- Posted by: [email protected]
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In a strategic move amidst the bankruptcy proceedings of FTX, FTX Ventures, the venture capital arm of the distressed crypto exchange, is set to make a significant deal with Dave, a fintech firm renowned for its financial services mobile application. The agreement entails Dave acquiring a $100 million convertible promissory note originally issued by FTX Ventures. However, this acquisition comes at a discounted price of $71 million, subject to approval from a bankruptcy court. A hearing for this approval is scheduled for January 25.
A frequent financial instrument used by startups is the convertible promissory note, which operates as a loan with the possibility of being changed into a share in the company at a later stage. Dave, known for its diverse offerings such as savings accounts, cash advances, and spending accounts, boasts a total funding of $536.3 million over nine rounds, as per its Crunchbase profile. Notably, in September 2023, the company raised an additional $50 million through a debit emission.
The collaboration between Dave and FTX began in March 2022, focusing on facilitating cryptocurrency payments on Dave’s platform. This partnership resulted in FTX Ventures making a $100-million investment in Dave. However, complications arose following FTX’s bankruptcy in November 2022, leading the bankruptcy court to reclaim various investments, payments, and donations made by FTX and its subsidiaries.
On December 19, FTX debtors announced a global settlement with the Joint Official Liquidators for FTX’s Bahamian arm, which is a critical milestone in the continuing bankruptcy proceedings. This settlement is viewed as a “novel and mutually beneficial solution” addressing cross-border legal complexities.
Since November 2022, FTX debtors have sought court approval for multiple asset liquidations, including the divestment of LedgerX and the liquidation of digital assets valued at $3.4 billion. Additionally, agreements have been reached to resolve issues between FTX and Genesis. Out of the approximately $8.7 billion in misappropriated customer funds, efforts have recovered at least $7 billion in assets. Despite progress, the legal battle involving FTX is expected to extend over several years, marked by multiple parties vying for remaining assets, making it a complex and time-consuming process.
Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog, predicts a prolonged legal battle due to various clawback claims aiming to recover funds paid out by FTX before its insolvency. These claims involve significant transfers and the involvement of formidable organizations capable of defending themselves. While such claims are typically resolved through settlements outside of court, negotiating these settlements could prolong the proceedings.
In addition to grappling with clawback claims, FTX faces a substantial $24 billion claim from the Internal Revenue Service (IRS) for unpaid taxes, further complicating the bankruptcy proceedings. The intricacies of the case underscore the challenges and uncertainties surrounding FTX’s financial woes.
