FTX estate disputes Jump Trading’s $264 million claim over unmaterialized Alameda loan

The FTX bankruptcy estate is contesting a $264 million claim made by Jump Trading’s subsidiary, Tai Mo Shan, regarding an undelivered loan of 800 million Serum (SRM) tokens from Alameda Research.

Alameda Research failed to deliver the 800 million SRM tokens as stipulated in the loan agreement. This failure is central to the dispute, as FTX lawyers argue that the loan never commenced because the tokens were not delivered.

The legal battle is a significant development in the ongoing efforts to resolve the financial fallout from FTX’s collapse.

Serum loan

The dispute centers around a loan agreement involving Alameda Research, which was supposed to deliver 800 million Serum (SRM) tokens to Jump Trading’s subsidiary, Tai Mo Shan.

This agreement was part of a larger strategy to support the decentralized exchange (DEX) Serum, which was heavily backed by FTX. Jump Trading made a substantial investment in Serum in the fall of 2020, offering market-making services.

However, the DEX collapsed following FTX’s bankruptcy in November 2022, revealing that despite its decentralized claims, it was effectively controlled by the defunct exchange. The loan was slated to commence in 2023 and never materialized due to FTX’s collapse.

Tai Mo Shan asserts that the firm’s failure to deliver these tokens warrants $264 million in damages, which the exchange is liable for. However, FTX lawyers counter that since Alameda did not deliver the SRM tokens, the loan agreement is void under the Master Loan Agreement, which allows for nullification if a loan does not commence.

According to FTX’s legal team:

“It is undisputed that Alameda failed to deliver the cryptocurrency contemplated by the Loan Confirmation to the Master Loan Agreement. The loan, therefore, did not commence.”

FTX’s legal team also suggested that the terms of the loan agreement, which involved providing 800 million SRM tokens without any fee or interest, could imply fraudulent transfers. They indicate that further discovery may reveal more about these potential fraudulent transfers.

The court filings state:

“For the reasons stated here and more following discovery, Tai Mo Shan may be liable to the Debtors for fraudulent transfers.”

Circulating supply less than loan

The 800 million SRM tokens in question represent about 80% of the total SRM supply, significantly more than the 372.7 million currently in circulation.

SRM was one of the prominent tokens backed by FTX and Alameda Research. It peaked at just over $12.50 in September 2021, with a trading volume of $1.2 billion. As of press time, SRM is worth approximately 3 cents.

Jump Trading’s claim for $264 million in damages is based on an options model that considers the market price of SRM at the time of the bankruptcy filing, the repayment option price, SRM’s implied volatility, and the loan’s interest rate.

FTX lawyers challenged the valuation and said it was “wholly unsupportable.” They criticized the options model used for calculation as flawed and lacking clear documentation.

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