Dave, a fintech firm that offers financial services through its mobile application, is set to acquire a $100-million convertible promissory note previously issued to FTX Ventures, the venture capital arm of bankrupt crypto exchange FTX. The deal, pending approval from a bankruptcy court, will see Dave purchasing the note at a discounted price of $71 million.
A convertible promissory note is a financial instrument commonly used by startups, functioning as a loan that can be converted into a share of the company at a later stage. Dave, known for its savings accounts, cash advances, and spending accounts, has secured a total of $536.3 million in funding over nine rounds.
Partnership and Setbacks
The collaboration between Dave and FTX began in March 2022 when they partnered to facilitate cryptocurrency payments on Dave’s platform. As part of this partnership, FTX Ventures made a $100-million investment in Dave. However, following FTX’s bankruptcy in November 2022, the bankruptcy court reclaimed various investments, payments, and donations made by FTX and its subsidiaries.
In a recent announcement on December 19, FTX debtors revealed a global settlement with the Joint Official Liquidators for FTX’s Bahamian arm, as part of the ongoing bankruptcy proceedings. This settlement is seen as a “novel and mutually-beneficial solution” that addresses cross-border legal issues.
Complex Bankruptcy Proceedings
Since November 2022, FTX debtors have filed multiple requests to liquidate the company’s assets in order to repay creditors. The court has already granted approval for several sales, including the divestment of LedgerX and the liquidation of digital assets worth $3.4 billion.
Furthermore, an agreement has been reached to resolve issues between FTX and Genesis, with at least $7 billion in assets being recovered out of the approximately $8.7 billion in misappropriated customer funds.
The legal battle surrounding FTX’s bankruptcy is expected to be lengthy and complex. According to Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog, the involvement of multiple parties and the litigation of clawback claims will likely prolong the case. Negotiating settlements for these claims can be time-consuming, although they are typically resolved outside of court.
In addition to clawback claims, FTX also faces a substantial $24 billion claim from the Internal Revenue Service (IRS) for unpaid taxes. This further complicates the bankruptcy proceedings.
