FTX Lawyers Dispute Jump Trading $264M Claim Over Unmaterialized Alameda Loan

The FTX bankruptcy estate is contesting a $264 million claim by Jump Trading’s subsidiary, Tai Mo Shan, regarding an undelivered loan of 800 million Serum (SRM) tokens from Alameda Research. The estate argues that the loan never commenced, rendering the claim invalid.

FTX and Jump Trading Dispute Over Serum (SRM) Token Loan

Tai Mo Shan asserts that failing to deliver these tokens warrants $264 million in damages. FTX lawyers argue that because Alameda did not deliver the SRM tokens, the loan never commenced, thus invalidating the claim.SRM was the native token of the decentralized exchange (DEX) Serum, which was backed by FTX. Jump Trading made a major investment in Serum in the fall of 2020, offering market-making services.

The #FTX bankruptcy estate is contesting a $264M claim by Jump Trading's subsidiary.

The claim alleges that Alameda failed to deliver 800M #Serum.

The disputed 800M $SRM tokens account for 80% of total supply far exceeding the current circulating supply of 372.7M. pic.twitter.com/oGJqtNbNIY

— Satoshi Club (@esatoshiclub) July 11, 2024

The DEX collapsed after FTX went bankrupt in November 2022. Insiders had revealed that, despite its decentralized claims, Serum was effectively controlled by FTX.

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

In court documents, Jump Trading argued that the FTX-Alameda estate owes it more than $264 million in damages based on an options model, which 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’s lawyers contend that the loan agreement was never fulfilled.

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

They emphasized that the Master Loan Agreement allows for voiding the loan confirmation when a loan does not commence.

Valuation and Allegations of Fraud From FTX Lawyers

FTX lawyers also challenge Jump Trading’s valuation, describing it as “wholly unsupportable” and criticizing the options model used for calculation as flawed and lacking clear documentation. The estate pointed out that while Jump Trading estimated the damages based on SRM’s price at the bankruptcy filing, the loan agreement specified that the tokens would be delivered in daily installments starting August 1, 2023.FTX’s legal team also suggested that Tai Mo Shan might be liable for fraudulent transfers. “For the reasons stated here and more following discovery, Tai Mo Shan may be liable to the Debtors for fraudulent transfers,” court filings stated.They highlighted that the Master Loan Agreement and Loan Confirmation appeared to provide 800 million SRM tokens without any fee or interest, raising questions about the legitimacy of the transaction.

SRM was one of the prominent tokens backed by Sam Bankman-Fried’s FTX and Alameda Research.

It peaked at just over $12.50 in September 2021, with a trading volume of $1.2 billion. Now, market data shows that SRM is worth approximately 3 cents.

This dispute is part of the larger context of resolving financial claims after FTX’s collapse.

Meanwhile, FTX creditors have started voting on a liquidation plan to compensate exchange customers. The voting period ends on August 16, and final approval for the plan is expected in October this year.

FTX’s collapse has brought to light numerous challenges and disputes involving high-stakes financial agreements.