Bankruptcy Move: FTX Ventures Cuts Deal with Dave for $100 Million Stake

Dave, a fintech firm specializing in 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 involves Dave purchasing the note at a discounted price of $71 million, pending approval from a bankruptcy court, the company said in a Friday press release. 

A hearing for the approval is scheduled for January 25.

A convertible promissory note is a financial instrument commonly used by startups. 

It functions as a loan that can be converted into a share of the company at a later stage. 

Dave, known for its offerings such as savings accounts, cash advances, and spending accounts, has secured a total of $536.3 million in funding over nine rounds, according to its Crunchbase profile.

In September 2023, the company raised $50 million through a debit emission.

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.

FTX Debtors Seek to Liquidate Assets

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.Out of the approximately $8.7 billion in misappropriated customer funds, at least $7 billion in assets have been recovered. As reported, FTX’s legal battle could extend over several years.The case, filed in November, involves multiple parties fighting over the remaining assets, making it more complex and time-consuming than other crypto bankruptcies, according to Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog.Rosenberg said he believes the FTX case will drag on for an extended period due to the litigation of various clawback claims. These claims aim to recover funds that FTX paid out in the period leading up to its insolvency.Given the significance of these transfers and the involvement of large organizations capable of defending themselves, the case could be protracted. While these types of claims are typically resolved through settlements outside of court, negotiating such settlements can be time-consuming.In addition to fighting against clawback claims, FTX faces a substantial $24 billion claim from the Internal Revenue Service (IRS) for unpaid taxes, which further complicates the bankruptcy proceedings.