(Bloomberg) — An FTX customer sued the hedge fund that bought his claim in the bankrupt cryptocurrency exchange, claiming that Olympus Peak underpaid him while it stands to make more than $1 million from their deal.
Nikolas Gierczyk of California says Olympus Peak owes him a bigger payout after he sold his $1.59 million claim last year to the hedge fund at a “substantial 42% discount” and FTX this year won approval of a bankruptcy reorganization plan that is expected to repay customers from 129% to as much as 146%.
Gierczyk claims he negotiated an explicit right to additional recovery in his agreement with Olympus Peak, but the fund refused to honor it, according to this complaint Thursday in federal court in Manhattan.
“This lawsuit is entirely without merit and is based on a plain misreading of the parties’ contract,” Ariel Lavinbuk, a lawyer for the hedge fund, said in an emailed statement.
Rare among bankruptcy cases, FTX amassed billions of dollars more than it needed to cover what customers lost in the exchange’s November 2022 collapse — thanks in large part to a bullish crypto market over the last year.
It’s common for hedge funds to buy claims in distressed assets at a discount — offering claimants a quick payout, while the funds hold out for a more robust recovery in the bankruptcy process.
Gierczyk says that under his purchase agreement with Olympus Peak, the hedge fund promised to buy from him, at the same 42% rate he sold his claim, any excess distribution from the bankruptcy. “However, Olympus Peak made clear that they would not be fulfilling their end of the bargain,” his lawyers wrote.
The case is Gierczyk v. Olympus Peak Trade Claims Opportunities Fund I Non-ECI Master LP, 24-cv-07708, US District Court, Southern District of New York (Manhattan).
–With assistance from Rachel Graf.
(Updates with comment by lawyer for hedge fund in fourth paragraph.)
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