PadAcci

Everybody knows half the crypto industry blew up in 2021, once again rendering investors embarrassed to talk about their internet coins in public. Less know what actually happens when you have assets on an exchange that goes under or how you can get them back. I'll try to explain. Let's say someone had $50k on FTX. After the blowup, the money's gone. It's been replaced with a $50k FTX bankruptcy claim. This poor soul will hereafter be referred to as a "claimant." - he started the year a moneyed individual, but through the machinations of the free market, asset speculation and stimulant abuse he's been transformed into a claimant. In the past, claimants were completely screwed. They had 2 options: Option 1 was the formal bankruptcy process, which is comically bad. How bad? To give an example: Mt. Gox was the first crypto exchange bankruptcy way back in 2014. Claimants are still *to this day* dealing with legal emails about the claims process. Not a single person has been paid back yet. If you know someone who lost funds in Mt. Gox, there's a good chance they rate the experience as being more painful than both childbirth and kidney stones. Being forced to wait almost ten years to get your money back is a special type of hell for crypto investors, because the industry moves so fast they all assume they can at least 10x their money in a decade. This belief may be totally delusional in most cases, but it's still what they believe, so they want their money *now.* So what's taking ten years? What are they even doing? They're figuring out how to divide the bankrupt entity's remaining assets. It's not that bankruptcy mean they lost everything - it's that they have more debts than assets. They can usually still pay people back some, just not the full amount they're owed. In the case where our claimant has an FTX claim with a value of $50k, maybe they only have enough to pay him back $20k, or $.40 on the dollar. The bankruptcy process is how they decide who gets paid what. When a cryto exchange goes under it's pretty complicated. Lots of individuals and institutions are jockeying to be paid back first, or at a higher rate based on the specific legal technicalities of how they lost money. Add in the bankruptcy lawyers trying to siphon as much of the remaining assets for themselves as legal fees, and the claimants are waiting long periods of time for a constantly shrinking pots of money. The longer the process drags on, the more lawyers can slurp off and the less claimants get at the end. Okay, so now you agree bankruptcy filings suck. Whats our other choice? Option 2 is finding someone to buy your claim. Theoretically there are an infinite number of ways to do this, but historically everyone just goes and finds some dude in a telegram channel. Telegram guy intends to buy your claim and hold onto it until the bankruptcy proceedings pay him out, so he's gonna be offering you a lot less than he thinks the claim is worth or the deal wouldn't make sense for him. Worse, he has to verify your identity *extremely* soundly. If he buys a fake claim, or a claim from someone who isn't legally allowed to sign it over to him, he's out all the money. So now you're sending your address and passport and SSN to the telegram guy. After a 6-week verification process, maybe he decides your documentation looks good and shoots you a lowball offer. But only if your claim is worth more than a million dollars or so - this whole process is so expensive and time-consuming that buyers just tell people with small claims to kick rocks from the get-go. So option 2 gets you the money faster, but you'll take a massive haircut and spend weeks going back and forth with the telegram guy while potentially getting your identity stolen. Evil psychopaths Kyle Davies and Su Zhu realized this whole system was extremely broken. In their quest for ruthless capital extraction by any means necessary, they streamlined option 2 and accidentally helped bankruptcy victims. By automating the claim verification process, you can massively steamline claimant identification. Instead of sending your birth certificate to the telegram guy and waiting to hear back, you're scanning an ID to a third party's verification portal where it's instantly checked against a known database. By collecting multiple claim buyers in one place you force them to compete against each other and offer claimants fair prices. Removing inefficiencies sweetens the deal for everyone. Claim buyers spend less time and money on claimant identity confirmation, so they can offer claimants better rates while taking on less risk. Claim sellers have multiple parties competing to buy from them, so they get better prices. This unlocks a whole new chunk of the market, too. There are more small claims than big ones, but the expense of verifying claims manually made it unprofitable to buy claims worth less than $1M. Automated verification removes that barrier, so buyers become interested in even the tiny claims. This is especially good because small claimants are more likely to be in urgent need of their funds than bigger ones. The only crypto claims market of this type lives on OPNX - an exchange backed by diabolical supervillians Kyle Davies and Su Zhu. I wasn't sure why people like them would suddenly decide to start rescuing bankruptcy victims, so I reached out to Kyle and asked. "I don't feel good about what I'm doing here. I'd have preferred not to help anyone, but I couldn't find a way around it. Money's always been my top priority though, so if the only way to get it is by helping people then I'll do what I have to." One of the things Kyle felt worst about was creating a claims market so efficient that claimants were consistently getting offers 50% higher through his system than what the Telegram buyers were offering. Even more awful, the referral program he designed to crush all competition pays people 5% of the claim's value if they refer someone. After the crash, there are about $20B in outstanding crypto claims. 5% of 20 comes out to a clean billion. When I pointed out he was paying people one billion dollars, he clenched his enormous fists in frustration. A whistling sound started coming out of his ears. I ignored the ear hissing and told him about how I'd been searching through my old Discord servers, looking for buddies from last cycle who'd logged off after the FTX bankruptcy. I found four who were claimants and referred them. It paid off my mortgage. I'd heard a lot of bad stuff about Kyle, but I wanted him to know he was the only reason I could afford a house. He was completely red by this point. I started thanking him one last time for changing my life but he hung up the videocall before I could finish.