Token Representing FTX Debt Still Trading on Huobi, Despite Official Denial
Since Huobi listed FTX Users’ Debt (FUD) on February 5, the token’s price has declined by 7x. The token was listed as claiming to represent the now-bankrupt exchange FTX’s debt to the “highest quality” creditors. Despite FTX’s warning that the debtors have not issued any “debt token,” FUD is trading at $13.1 on Huobi at the time of writing. Meanwhile, DebtDAO claims the token represents a bond issued “on behalf of FTX customers.“
FTX Meltdown Spawned a New Kind of Crypto Demand
The FTX crash brought the crypto space into turmoil in more ways than just FUD – fear, uncertainty, and doubt. Alongside eroding the trust in centralized platforms, FTX’s downfall seems to have sparked a new kind of service. The first to meet the demand for compensation of users’ funds was the controversial “GTX” exchange.
By February 3rd, the proposed GTX exchange had already completed $25 million in seed funding, according to Arthur Hayes, the co-founder of BitMEX. This represents a curious situation in which founders of bankrupt Three Arrows Capital (3AC), Kyle Davies and Zhu Su, who indirectly contributed to the crypto bankruptcy death spiral, now participate in trading bankruptcy claims.
The new GTX exchange, rebranded as Open Exchange (OPNX), has no shortage of bankruptcy claims to work with: FTX, Genesis Trading, BlockFi, Celsius Network, Mt Gox, Voyager Digital, and even 3AC itself. Altogether, these failed companies make a $20 billion market for trapped user funds.
Coinciding with that timeline comes the FTX Users’ Debt (FUD) token on February 5th.
What is the FUD Token?
Huobi listed the FTX Users’ Debt (FUD) token as a “bond token for the highest quality creditors in the FTX event.” Issued by DebtDAO treasury, FUD represents FTX debt to users, accounting for 20 million tokens, with each priced at a $1 per token discount. Huobi says the token’s fair price is between $1 and $5, representing 2% of FTX’s debt at 20 million FUD supply.
This implies the debt value ranges between $20 million to $100 million. Following the FTX database restoration, and if the debt is more significant than $20 million, DebtDAO will airdrop a secondary FUD offering to existing FUD holders.
Consequently, this dynamic created a frenzy of speculation, which ballooned the token’s price after the listing was as high as $100 per FUD. At press time, FTX Users’ Debt (FUD) token trades at $13.1 (in USDT stablecoin) on the Huobi exchange.
Controversial Figure Backing FUD, Leading to Actual FUD
As the founder of the low-fee payment network Tron (TRX), Justin Sun has been at the center of many rumors in the crypto space. Case in point, Juan Benet, the developer behind the InterPlanetary File System (IPFS), claimed that Tron’s whitepaper is essentially a clone of other projects.
In another controversial instance, Tron’s algorithmic stablecoin USDD has been met with suspicion as a clone of the spectacularly failed Terra USD (UST) stablecoin.
The TRON blockchain was born by copying Ethereum, plagiarizing the Ethereum whitepaper word for word.
Now TRON is copying Luna’s decentralized dollar. and faithful to its roots, the stages of the TRON stablecoin will be named Moon and Mars. Very original.
— Alex Krüger (@krugermacro) April 21, 2022
After the successful Tron ICO in August 2017, Sun acquired the legendary BitTorrent file-sharing service, rebranding it to BitTorrent File System (BTFS) in April 2020. Ethereum co-founder Vitalik Buterin depicted BitTorrent’s transformation as akin to “looking at a zombie” while decrying Justin Sun’s leadership in the project as a “dictatorship.”
Justin Sun’s controversy runs so high in the crypto circles that after buying the Steemit app, Steem blockchain issued a reversible soft fork. This move aimed to prevent Sun from having extreme voting power in the delegated proof-of-stake Steem blockchain.
Suffice it to say, it is in this light of repeated controversies that Justin Sun issued FTX Users’ Debt Token (FUD) via the DebtDAO treasury. As decentralized autonomous organizations (DAOs), these smart contract-based pools provide a streamlined vehicle to support a specific project, such as ConstitutionDAO. Interestingly, Sun announced the integration of OpenAI into Tron a day before the FUD launch.
As an industry-leading decentralized stablecoin financial infrastructure, #TRON will provide an AI-oriented decentralized payment framework for AI systems #ChatGPT and @OpenAI. pic.twitter.com/7GcO7m4vV7
— H.E. Justin Sun ??? (@justinsuntron) February 4, 2023
This move fits Sun’s pattern of jumping on emerging trends, hoping for one project’s hype to spill into another. In the meantime, the FTX Debtors tweeted that users should be “on alert for scams from entities claiming to be affiliated with FTX,” pointing out that no official FTX debt tokens exist.
The FTX Debtors remind stakeholders to be on alert for scams from entities claiming to be affiliated with FTX. The FTX Debtors have not issued any debt token and any such offers are unauthorized. All announcements will occur through this account and https://t.co/5G4nXK4kJr
— FTX (@FTX_Official) February 17, 2023
Nonetheless, given the token’s above-fair price, it appears that Sun’s gambit paid off. With so many FTX users in a bind, Sun provided them a way to “trade their FTX debt on the open market.”
According to Sun, those who now hold FUD tokens should receive extra 2 FUDs after the secondary offering airdrop, when DebtDAO buybacks them at a 1:1 ratio. In turn, this could spike the demand for more FUDs, increasing the value of each token to indirectly ‘make customers whole’ in SBF’s infamous parlance.
This article originally appeared on The Tokenist
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