Xclaim, a marketplace where debtors can sell bankruptcy claims for failed crypto companies, announced on Tuesday that it had raised $7 million in a funding round led by Josh Jones, a venture capitalist who founded one of the earlier Bitcoin exchanges.
Matthew Sedigh, founder and CEO of Xclaim, declined to provide his company’s implied valuation or name other participants in the funding. He did say many of the bankruptcy marketplace’s earlier investors joined the Series A investment round, including General Catalyst, First Round Capital, Freestyle Capital, and Tribe Capital.
“We are a novel product for an unsexy area,” he told Coins2Day, “but we’re bringing some optionality and power to those that were pretty powerless before.”
Combined with earlier seed rounds, Xclaim has raised approximately $12 million total, Sedigh added. He plans to use the injection of capital to expand Xclaim’s website, its products, and hire more staff.
The company’s funding announcement follows a slew of high-profile crypto companies declaring bankruptcy in 2022, including Voyager, BlockFi, Celsius, and, most infamously, FTX, the exchange whose founder, Sam Bankman-Fried, is now facing criminal charges for fraud.
“After founding BitcoinBuilder and having a decade-long front-row seat to the Mt. Gox bankruptcy, it became clear that the standard process for recovering value for creditors was broken and maddeningly slow,” Jones, Xclaim’s lead investor, said in a statement.
BitcoinBuilder, Jones’s exchange, had a significant amount of funds tied up in Mt. Gox, once the world’s largest exchange and which went belly-up after hackers siphoned approximately $500 million from under its owner’s nose.
While Sedigh, who spent more than a decade consulting for financially distressed businesses, has found his niche in crypto, he originally envisioned Xclaim to be a general-purpose marketplace where debtors could sell claims for cents on the dollar. However, by the end of 2022, two years after he launched Xclaim, he and his team decided to cater exclusively to crypto claims. “We weren’t gaining the traction that we were hoping for in the general-purpose bankruptcy market,” he told Coins2Day.
His pivot was well-timed. The company says it has now listed over $600 million in crypto claims, and it boasts that debtors have sold stakes in crypto companies as large as $52 million through its platform.
The moment is so ripe for crypto bankruptcy claims that even the founders of a bankrupt crypto company are making a play for that market share: Last week, the founders of Three Arrows Capital, a crypto hedge fund that went bankrupt in 2022, launched a competing bankruptcy marketplace called OPNX.
Sedigh, however, isn’t worried.
“If more people are shining a light on the opportunity of trading bankruptcy claims or trading crypto claims, and they have an opportunity to work with the team that precipitated much of the turmoil in the market or Xclaim,” Sadigh told Coins2Day, “I feel pretty good that we win out on that comparison.”
