Crypto

Jump Trading Sues FTX Estate Over $264M Loan for 800M SRM Tokens

FTX estate disputes $264M claim over 800M Serum tokens, alleging fraudulent transfers by Jump Trading's subsidiary.

By Alex P. Chase

7/11, 03:01 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • FTX estate disputes Jump Trading's $264 million claim over 800 million SRM tokens, arguing the loan never commenced due to non-delivery.
  • The contested SRM tokens represent 80% of total supply, with current market value at approximately 3 cents, down from a peak of $12.50 in September 2021.
  • FTX estate challenges Jump's damages calculation and suggests potential fraudulent transfers by Tai Mo Shan in court filings.

FTX Bankruptcy Estate vs. Jump Trading

The FTX bankruptcy estate is currently embroiled in a legal battle with Jump Trading's subsidiary, Tai Ho Shan, over a claim involving 800 million Serum (SRM) tokens. Tai Ho Shan asserts that Alameda Research, a sister company of FTX, failed to deliver these tokens and is seeking $264 million in damages. However, Alameda contends that the loan agreement never commenced, rendering the claim invalid.

SRM, the native token of the decentralized exchange (DEX) Serum, was once a prominent asset in the crypto market. Jump Trading had made a significant investment in Serum in 2020, providing market-making services. The DEX collapsed following FTX's bankruptcy in November 2022, with insiders revealing that the exchange was decentralized in name only, as orders came from FTX.

The 800 million SRM tokens in question represent approximately 80% of the total 1 billion SRM in existence and exceed the current circulating supply of 372.7 million tokens. The token's max supply was initially set at over 10.1 billion but was cut short due to its collapse in 2022.

Disputed Valuation and Fraud Allegations

Jump Trading's claim for $264 million in damages is based on an options model that considers the market price of SRM on the bankruptcy filing date, the repayment option price, SRM's implied volatility, and the loan's interest rate. However, the FTX-Alameda estate disputes this valuation, arguing that it is "wholly unsupportable" and based on a flawed model. The estate did not provide further documentation to support its argument.

In court documents, the FTX-Alameda estate also alleged that Tai Mo Shan might have engaged in fraudulent transfers. "For the reasons stated here and more following discovery, Tai Mo Shan may be liable to the Debtors for fraudulent transfers," the filings read. The estate claims that Tai Mo Shan may have received constructively fraudulent transfers, including the purported loan at issue.

The estate's lawyers further argue that the Master Loan Agreement and Loan Confirmation stipulated that Tai Mo Shan would receive 800 million SRM tokens for no fee and no interest, which they find questionable. "There are no contract provisions specifying any amount of collateral or consideration given by Tai Mo Shan in return for the alleged loan," they wrote.

SRM's Rise and Fall

SRM was once a star in the crypto market, peaking at just over $12.50 in September 2021 with a trading volume of $1.2 billion, according to CoinDesk Indices data. This surge in value created millionaires within the exchange, which reportedly annoyed FTX founder Sam Bankman-Fried, as he feared these newly wealthy employees were not interested in long hours. Today, SRM is worth approximately 3 cents, a stark contrast to its heyday.

The FTX-Alameda estate maintains that the loan agreement with Tai Mo Shan was never fulfilled because Alameda did not deliver the SRM tokens as specified. "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," the estate's lawyers wrote. They argue that the only remedy available to Tai Mo Shan under the Master Loan Agreement is to void the applicable Loan Confirmation.

Management Quotes

  • Lawyers for the FTX-Alameda estate:

    "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."
    "The debtors submit that Tai Mo Shan may have been the recipient of certain constructively fraudulent transfers...including the purported loan at issue here."
    "There are no contract provisions specifying any amount of collateral or consideration given by Tai Mo Shan in return for the alleged loan."