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Hedge Fund Faces Legal Action After FTX Reorg News Rocks Market

In a plot twist from the FTX saga, one of its creditors, Nikolas Gierczyk, has thrown down the legal gauntlet against hedge fund Olympus Peak. The California-based customer claims that Olympus Peak, which scooped up his FTX claim last year, massively undercut him on what could now be a mega payout. Gierczyk’s case unfolds as FTX’s restructuring plan hits the court-approved go button, sparking a ripple in the bankruptcy waters.

The Claim Deal: A 42% Haircut Turns into a Headache

Gierczyk had sold his $1.59 million claim to Olympus Peak at a steep 42% discount last year. Why? The usual in the crypto space: grab the quick cash and let the hedge fund sharks wait out the lengthy bankruptcy slog. But the market turned the other way, and FTX’s pot of recoverable assets ballooned to a staggering $16 billion. That’s where the headache begins for Olympus Peak.

According to the lawsuit filed in Manhattan federal court, Gierczyk says the hedge fund owes him more dough. The deal included an “Excess Claim Amount” clause, meaning Olympus Peak would buy any extra distribution at the same discounted rate. With FTX’s creditors potentially looking at a sweet 129-146% payout, Gierczyk is calling foul on the hedge fund’s refusal to cough up the extra cash.

Bankruptcy Twist: FTX’s Surplus Could Mean Big Payouts

It’s no secret hedge funds swoop in on distressed assets, grabbing claims at a discount in hopes of cashing in later. Olympus Peak is no different, playing the classic game of patience in bankruptcy land. Gierczyk, however, negotiated an explicit right to any further recovery beyond the original claim amount. He’s accusing Olympus Peak of trying to dodge that obligation.

Unusually, FTX is sitting on way more funds than your average crypto implosion. Thanks to a resurgent crypto market over the past year, FTX is flush with billions beyond what’s needed to cover customer losses. Gierczyk’s lawsuit comes hot on the heels of a bankruptcy judge greenlighting FTX’s restructuring plan, which is set to funnel those funds back to customers at levels way beyond what anyone expected.