Unlock Cash With Tokenized FTX Claim As Loan Collateral

Key Points:

• A creditor uses an FTX claim as collateral for a loan on DeFi platform Arcade.
• The $31,307 claim is tokenized as a non-fungible token (NFT) and used to secure a $7,500 loan.
• The transaction is an example of real-world assets (RWA) tokenization and highlights the growth of on-chain claims solutions.

FTX has recently pledged a claim as collateral for a loan in the decentralized finance (DeFi) protocol Arcade, marking the first-ever on-chain loan backed by an FTX claim.

The transaction took place on the bankruptcy claims platform, Found, where the $31,307 claim was tokenized, and its ownership was represented by a non-fungible token (NFT). The NFT was used as collateral for a $7,500 loan that needs to be paid back within five days. If the borrower is not able to repay the loan, the lender will be entitled to the claim.

This transaction is an excellent example of the potential of real-world assets (RWA) tokenization, which allows tokenizing the ownership rights of an asset on a blockchain. The tokenization of assets in DeFi is a hot topic, and it is one of the most prominent areas in the space. Many real-world assets can be tokenized, including stocks, government bonds, real estate, and commodities.

Found, the bankruptcy claims platform, confirmed that the original creditor and lender went through its biometric Know Your Customer and Anti-Money Laundering screenings. The company’s website states that users can access loans using bankruptcy claims as collateral, with a 10% transaction fee on successful trades.

FTX filed for bankruptcy in November 2022, resulting in billions of dollars being locked in users’ accounts for court proceedings. According to some estimates, FTX claim holders could recover between 35% and 66% of their face value. The surge in bankruptcy filings in the crypto industry is driving on-chain claims solutions. Found, for example, was launched at the beginning of this year, and the co-founders of the collapsed hedge fund Three Arrows Capital launched the claims trading platform Open Exchange in April.

The bankruptcy cases in the crypto industry have flooded the courts in the past year, with many of them stemming from the collapse of FTX. Some notable examples include cases associated with crypto firms Genesis Global Trading and BlockFi.

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