Bankruptcy marketplace Xclaim raises $7 million after crypto rebrand
Xclaim CEO and Founder Matthew Sedigh. Courtesy of Xclaim
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 former Bitcoin exchanges.
Matthew Sedigh, founder and CEO of Xclaim, declined to provide the company’s implied valuation or name other participants in the financing. He said many of the bankruptcy’s previous investors joined the Series A investment round, including General Catalyst, First Round Capital, Freestyle Capital and Tribe Capital.
“We are a new product for an unsexy area,” he told me Fortune“but we bring some choice and power to those who were quite powerless before.”
Combined with previous seed rounds, Xclaim has raised approximately $12 million in total, Sedigh added. He plans to use the capital injection to expand Xclaim’s website, products and hire more staff.
The company’s funding announcement follows a number of high-profile crypto companies declaring bankruptcy in 2022, including Voyager, BlockFi, Celsius and, most notoriously, FTX, the exchange whose founder, Sam Bankman-Fried, now faces criminal fraud charges.
“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 excruciatingly slow,” Jones, Xclaim’s lead investor, said in a statement.
(BitcoinBuilder, Jones’ exchange, had a significant amount of funds tied up in Mt. Gox, once the world’s largest exchange, which collapsed after hackers took about $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 as a general marketplace where debtors could sell claims for cents on the dollar. By the end of 2022, two years after he launched Xclaim, he and his team decided to exclusively cater to crypto claims. “We didn’t get the traction we were hoping for in the general bankruptcy market,” he said Fortune.
His pivot was well timed. The company says it has now recorded 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 calls for crypto bankruptcy 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 set to go bankrupt in 2022, launched a competing bankruptcy marketplace called OPNX.
However, Sedigh is not worried.
“If more people shine a light on the possibility of trading bankruptcy claims or trading crypto claims and they have an opportunity to work with the team that sparked a lot of the turmoil in the market or Xclaim,” Sadigh said Fortune“I feel pretty good that we’re winning on that comparison.”
