Anthropic gamble could save FTX customers from total ruin

Sam Bankman-Fried’s decision to invest $500 million in AI startup Anthropic on October 5, 2021 might have been the best decision of his career. Anthropic is one of the few things — along with the billions of dollars worth of crypto token recoveries from bankruptcy cleanup expert John J. Ray III — that’s saving FTX customers from total ruin.

In a recent court filing, Ray III announced the FTX bankruptcy estate’s intention to sell its 7.84% stake in Anthropic. The AI startup was last valued at $18 billion in December.

Specifically, Bankman-Fried’s $500 million investment has now converted into 44,539,240 shares of Anthropic Series B preferred stock at $11.2261 per share. Depending on the terms of the ultimate sale of those shares, FTX’s holdings could be worth $1.4 billion.

In its court filing, Ray III is asking for permission to “conduct any Auction in accordance with the following procedures and any supplemental procedures the debtors consider appropriate and in the best interests of the debtors’ estates.”

Read more: FTX-funded charity Effective Ventures agrees to return donations

Anthropic: Inadvertently backed by criminals at FTX

It’s impossible to earnestly praise Bankman-Fried for his prescient investment in Anthropic. As he’s pleaded guilty in criminal court, he used FTX customers’ funds to make his investment. These funds were, of course, borrowed from FTX with no intention to repay unless he got lucky.

Stated plainly, he was gambling. Like all of Bankman-Fried’s investments, most of which lost money, he believed that doing immoral things (like borrowing from unwitting customers with no intention of handing anything back) was okay provided he could justify a greater likelihood of good in the end. As chronicled in court filings, Bankman-Fried professed unwavering belief in Effective Altruism’s cold, calculated decision-making process that doomed FTX as early as July 2021.

Prior to its bankruptcy, investors once valued FTX at $36 billion in an unbelievable 2022 financing round. Since its equity fell to $0 in November 2022, Ray III has struggled to sort through the rubble for a few billion dollars to repay some of its victimized customers. He has experience in multi-billion cleanup operations, with prior experience leading the wind-down of Enron itself.

Quintillions in FTX bankruptcy claims

Ray III’s success in recovering assets is commendable. He has found approximately $7 billion — $1.4 billion of which might be Anthropic. Of course, including double-counted claims against the same assets by distinct creditors, there is a staggering $2 quintillion (yes, quintillion) of total claims asserted by customers and general unsecured creditors against FTX’s $7 billion in recoveries. 

Nevertheless, legal observers generally expect the bankruptcy judge to subordinate almost all those quintillions of dollars worth of claims to customers. This is only fair, as customers didn’t expect Bankman-Fried to be borrowing their deposits to invest in random crypto projects or Effective Altruism moonshots — even if it happened to work out slightly in their favor with one AI startup.

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