Overview of the Deal
Fintech firm Dave has reached a pivotal agreement to repurchase a significant financial instrument from FTX Ventures, the venture capital arm of the now-bankrupt cryptocurrency exchange FTX. The instrument in question, a convertible promissory note valued at $100 million, is set to be acquired by Dave for a discounted price of $71 million. This strategic move comes amidst FTX’s ongoing bankruptcy proceedings, with a court hearing scheduled for January 25 to seal the deal.
The Significance of the Convertible Promissory Note
Convertible promissory notes are commonly used in the startup ecosystem as a form of investment. These notes function as loans that can potentially be converted into company equity at a later stage. This financial tool has been a cornerstone in facilitating investments in emerging companies, providing a flexible approach for both investors and startups.
Dave’s Financial Services and Partnership with FTX
Dave is renowned for its innovative financial services offered through a mobile application. These services encompass savings accounts, cash advances, and spending accounts. Dave’s financial prowess is further highlighted by its substantial fundraising efforts, amassing $536.3 million over nine funding rounds. Their last funding round in September 2023 raised $50 million through debit emission. The partnership with FTX, established in March 2022, marked a significant foray into the cryptocurrency space for Dave, including a substantial $100 million investment from FTX Ventures.
FTX’s Bankruptcy and Asset Liquidation
FTX’s bankruptcy in November 2022 triggered a series of asset liquidations and reclaims of investments, payments, and donations made by the company and its subsidiaries. This included a global settlement with the Joint Official Liquidators for FTX’s Bahamian arm, addressing cross-border legal complexities. FTX’s debtors have been actively seeking court approvals to liquidate assets to repay creditors, including sales of significant assets like LedgerX, trust assets, digital assets, and resolving legal issues with Genesis.
Recovery Efforts and Legal Proceedings
In the wake of approximately $8.7 billion in misappropriated customer funds, efforts to recover assets have been successful, with at least $7 billion reclaimed. The legal proceedings against FTX founder Sam Bankman-Fried culminated in a guilty verdict on multiple counts of fraud and conspiracy, with his sentencing scheduled for late March 2024.