A creditor from the defunct cryptocurrency exchange FTX has tokenized their $31,307 bankruptcy claim as an NFT. 😱
This NFT, representative of the claim’s ownership, has been leveraged as collateral for a $7,500 loan via the DeFi protocol, Arcade. So far, this is the first-ever on-chain loan underpinned by an FTX claim, as confirmed by the bankruptcy claims platform Found.
The creditor’s move to tokenize their bankruptcy claim, known as Real-World Asset (RWA) tokenization, signals an innovative use of NFTs in a bankruptcy scenario. The NFT acts as collateral for the loan, with the lender acquiring rights to the claim in case of default. To enable this transaction, both creditor and lender underwent stringent biometric Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, maintaining regulatory compliance.
Platforms like Found, which facilitate loans using bankruptcy claims as collateral, are becoming increasingly significant due to the rising number of bankruptcy filings. As traditional assets and legal claims continue to be tokenized, the scope for the widespread adoption of decentralized financial services is broadening, offering individuals and organizations improved liquidity options. 🤹♂️