SpaceX Surge Could Be Worth Billions for FTX—Will Creditors Benefit?

Some customers harmed by the collapse of crypto exchange FTX under co-founder and former CEO Sam Bankman-Fried are keeping a close eye on SpaceX’s post-IPO performance.

As Elon Musk’s rocket-maker has soared far beyond its initial market valuation of $1.77 trillion, the firm’s Wall Street debut has lifted hopes among those tracking the exchange’s bankruptcy proceedings that creditors could walk away with more than previously anticipated.

Sunil Kavuri, a British investor who lost around $2 million to FTX’s implosion and has become a vocal spokesperson for Bankman-Fried’s other victims, told Decrypt that “it’s always great news seeing good investments that could help recovery and payment to FTX creditors.”

Decrypt reached out to FTX’s bankruptcy estate for comment but did not immediately receive a response.

The defunct exchange has doled out $10.3 billion to customers, Barbara Fried noted months ago in a blog post that’s dedicated to telling the “untold story” of her son, who recently lost a bid to overturn his 25-year prison sentence and fraud conviction.

She cited projections from Kyle Schmidt, a creditor advocate known as “Mr. Purple,” who estimated that final distributions could total 171% of claims for customers who had claims above $50,000—a figure that reflects a surplus derived from the estate’s asset liquidations and accrued interest.

“Schmidt suggests that one notable investment […] is likely to yield significant proceeds this year,” Fried highlighted, referencing FTX’s SpaceX investment via venture firm K5 Global.

In January of last year, John J. Ray III, CEO of FTX’s recovery trust, unveiled a settlement with K5 Global that resolved a lawsuit the exchange had brought in June 2023. Both parties agreed to work together to maximize recoveries for FTX stakeholders.

The lawsuit had sought to claw back $700 million in transfers that the defunct crypto venture had allegedly made with misappropriated funds. K5 still lists SpaceX in its portfolio.

“It is clear that K5 is a bright spot in the FTX portfolio,” Ray said in a statement. “The expected strong performance of their investments will be a key driver in the recovery efforts.”

Decrypt reached out to K5 for comment but did not immediately receive a response.

The defunct exchange has yet to comment on SpaceX’s Wall Street debut—and on whether creditors could actually benefit—but Kavuri noted the bankruptcy estate would have to telegraph its sale of stakes in K5 via court filings.

Prior to his conviction, Bankman-Fried was accused of stealing more than $8 billion worth of customer funds. In addition to using the money to make political donations and purchase real estate, Bankman-Fried also abused funds through venture capital investments.

During his criminal trial, Bankman-Fried sought leniency for the success of his investments, which included Robinhood and Anthropic. Nonetheless, the presiding judge rejected his argument, comparing the former crypto mogul to “a thief who takes his loot to Las Vegas.”

The defunct exchange’s exposure to SpaceX stemmed from a relationship cultivated between Bankman-Fried and Michael Kives, a “super-networker” who co-owns K5 Global alongside Bryan Baum, according to bankruptcy filings.

The filings note that Alameda Research, FTX’s sister trading firm, transferred massive amounts of money to a K5-affiliated entity, and—before the exchange collapsed in November 2022—one of K5’s funds had invested $190 million in Elon Musk’s rocket-maker.

SpaceX raised $1.73 billion at a post-money valuation of $125 billion that year, months before Bankman-Fried was accused of orchestrating a multibillion-dollar fraud, according to Forge. 

Although the estimate doesn’t account for shareholder dilution, Kavuri said that FTX’s exposure to SpaceX is likely worth several billion dollars based on the firm’s current market cap. On Wednesday, SpaceX’s market value jumped past $2.52 trillion, according to Yahoo Finance.