Using FTX Token as Collateral for Loans: A New Approach to Ease Your Cash Crunch Cost $31,307

A creditor who provided collateral for a DeFi loan requested a $31,307 claim from FTX, a crypto exchange that is currently bankrupt.

Using FTX Token as Collateral for Loans: A New Approach to Ease Your Cash Crunch

A creditor who gave collateral for a loan on the decentralized finance (DeFi) protocol Arcade filed a claim from FTX, a crypto exchange that is currently insolvent. According to the bankruptcy claims platform Found, this transaction was the first on-chain loan secured by an FTX claim.

The $31,307 claim given as collateral was tokenized and its ownership was represented by a non-fungible token (NFT). The NFT was used as collateral for a $7,500 loan that had to be repaid five days later on June 23. If the debtor fails to pay, the lender can claim the debt.

The bankruptcy claims platform Found confirmed that the first creditor and lender passed the biometric KYC and AML checks. The company’s website stated that users can access loans by giving their bankruptcy claims as collateral for a 10% transaction fee.

The transaction is an example of real-world asset (RWA) tokenization, where a token reflects the ownership rights of an asset on the blockchain. Since a wide range of real-world assets such as stocks, government bonds, real estate and commodities can be tokenized, asset tokenization is one of the most important areas in DeFi.

On Twitter, Found stated that the first creditor and lender passed the biometric Verify Identity and Prevent Money Laundering checks. The company’s website says that users can access loans by giving their bankruptcy claims as collateral for a 10% transaction fee.

Crypto-related bankruptcy cases occupied the courts last year. Most of them stemmed from FTX’s collapse. Cases linked to Genesis Global Trading and BlockFi were also included.

The rise in bankruptcy filings increases the demand for on-chain claim solutions. For example, Found started operating earlier this year and the co-founders of the collapsed hedge fund Three Arrows Capital launched the claim trading platform Open Exchange in April.