Dave, a fintech company specializing in financial services through its mobile application, is poised to acquire a $100-million convertible promissory note that was initially issued to FTX Ventures, the venture capital arm of the bankrupt crypto exchange FTX.
According to a Friday press release, the deal entails Dave acquiring the note at a discounted price of $71 million, subject to approval from a bankruptcy court. A hearing for the approval is scheduled for January 25.
A convertible promissory note is a common financial instrument used by startups, functioning as a loan that can later be converted into a share of the company during a subsequent stage. This acquisition by Dave represents a strategic move within the fintech industry.
Dave, recognized for its services including savings accounts, cash advances, and spending accounts, has accumulated a total of $536.3 million in funding across nine rounds, as indicated by its Crunchbase profile.
In September 2023, the company successfully raised $50 million through a debit emission.
The collaboration between Dave and FTX commenced in March 2022, with the two companies joining forces to enable cryptocurrency payments on Dave’s platform. As a significant aspect of this partnership, FTX Ventures made a noteworthy $100-million investment in Dave, underscoring the intersection between traditional fintech and the evolving landscape of cryptocurrency.
After FTX declared bankruptcy in November 2022, the bankruptcy court recovered numerous investments, payments, and donations previously made by FTX and its subsidiaries.
In a recent update on December 19, FTX debtors disclosed a comprehensive agreement with the Joint Official Liquidators overseeing FTX’s Bahamian branch, marking a significant development in the continuing bankruptcy proceedings.
This resolution is viewed as an innovative and mutually beneficial solution designed to tackle legal complexities arising from the cross-border nature of the case.
FTX Debtors Seek to Liquidate Assets
Since November 2022, FTX debtors have submitted numerous requests for the liquidation of the company’s assets with the aim of repaying creditors.
The court has already given the green light to several sales, such as the divestment of LedgerX and the liquidation of digital assets totaling $3.4 billion.
Moreover, a resolution has been reached to address conflicts between FTX and Genesis.
Of the roughly $8.7 billion in misappropriated customer funds, a minimum of $7 billion in assets has been successfully recovered.
As indicated in reports, FTX’s legal dispute is anticipated to extend over several years.
The case, initiated in November, has evolved into a complex and protracted legal battle involving multiple parties vying for the remaining assets, setting it apart from other crypto bankruptcies, as noted by Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog.
Rosenberg anticipates a prolonged duration for the FTX case, primarily due to the intricate litigation surrounding various clawback claims. These claims seek to retrieve funds disbursed by FTX in the period leading up to its insolvency.
Given the substantial nature of these transactions and the involvement of sizable organizations capable of robust defense, the case is likely to be drawn out. Although such claims often find resolution through out-of-court settlements, the negotiation process can be time-consuming.
Adding to the complexity, FTX is also contending with a substantial $24 billion claim from the Internal Revenue Service (IRS) for unpaid taxes, further complicating the bankruptcy proceedings.
