SpaceX’s valuation has surged, lifting expectations that FTX creditors could receive additional repayments. Because the bankrupt crypto exchange previously invested in SpaceX through venture capital firm K5 Global, the rise in value could increase the bankruptcy estate’s recoveries.

On June 17 local time, crypto news outlet Decrypt reported that FTX had exposure to a SpaceX stake through an investment structure linked to K5 Global before its bankruptcy. With SpaceX’s valuation rising sharply, the value of that investment could be reassessed.

Creditors are watching because SpaceX’s valuation has jumped in recent years. SpaceX is estimated to have started at about $1.77 trillion in market capitalisation after listing and is now valued at more than $2.5 trillion. Sunil Kavuri, a British investor who has represented an FTX creditor group, estimated that the value of SpaceX-related assets held indirectly by FTX could now amount to billions of dollars. He said the figure was a simple estimate that did not reflect the dilution of existing shareholders during subsequent fundraising.

Another reason creditors are focused is that FTX’s repayment process is already well advanced. Barbara Fried, a Stanford law professor and the mother of Sam Bankman-Fried, said in a post made public a few months ago that FTX had already distributed about $10.3 billion to customers.

Creditor activist Kyle Shmidt also estimated that the final distribution rate, based on principal, for customers with claims exceeding $50,000 could reach as high as 171%. He said the figure reflects higher recovered asset values and interest payments.

Shmidt pointed to SpaceX as one investment asset that could see additional gains this year. Kavuri also said it would be positive news if gains from the SpaceX investment help increase creditor recovery rates.

The link stems from the relationship between K5 Global and FTX. Court records show that FTX affiliate Alameda Research transferred large sums to a K5-related entity. One of K5’s funds is reported to have invested about $190 million in SpaceX in 2022, shortly before FTX collapsed. At the time, SpaceX raised $1.73 billion at a valuation of about $125 billion.

The FTX recovery trust announced an agreement with K5 Global in January last year, creating what it described as an important turning point in asset recovery efforts. John J. Ray III (존 J. 레이 3세), CEO of the FTX recovery trust, said the two sides agreed to resolve litigation and cooperate to maximise recoveries for FTX stakeholders. The lawsuit had been filed to unwind transfers of assets worth about $700 million that were suspected of being funded with misappropriated customer money.

Ray at the time described K5-related investment assets as a “bright spot” in the FTX portfolio. He said the performance of K5’s investment portfolio could become a key driver of future recovery efforts. One of K5’s flagship portfolio holdings is SpaceX.

Still, gains in SpaceX’s value do not automatically translate into additional creditor repayments. The FTX bankruptcy estate has not issued an official position on any plan for the SpaceX-linked investment assets or the possibility of additional distributions. Kavuri said that for the recovery trust to sell or monetise K5-related stakes, any plan would likely have to be disclosed through future court filings.

The industry views the case as a representative example of how venture investments that Sam Bankman-Fried made using customer funds are converted into recoverable value after bankruptcy. Bankman-Fried was convicted of misappropriating more than $8 billion in customer funds, which investigators said was used for political donations, real estate purchases and venture investments.

Market attention is now focused on how much of SpaceX’s valuation increase is reflected in the value of K5 stakes and in any eventual sale price. With a substantial amount already distributed to creditors, further rises in the value of remaining investment assets could lift the final repayment rate above current estimates.