The FTX bankruptcy estate sold a 5% stake in artificial intelligence coding startup Cursor for $200,000 in April 2023, and the company is now worth about $3 billion after SpaceX agreed to acquire the company this week at a $60 billion valuation.
SpaceX said on Monday it has the option to acquire Cursor for $60 billion later this year, or $10 billion if a full acquisition fails to proceed. The deal is a move by founder Elon Musk to close the gap in artificial intelligence coding tools with OpenAI and Anthropic, an area where he recently said xAI, the artificial intelligence company run by Musk that merged with SpaceX, was lagging behind rivals.
SpaceX is holding off on immediate acquisitions as it targets a valuation of $2 trillion in its planned initial public offering, including $10 billion as a breakup fee.
The cryptocurrency angle is located in the shareholding structure table. In April 2022, Alameda Research, a trading firm founded by Sam Bankman-Fried and operated jointly with FTX, invested $200,000 in Anysphere, the company that created Cursor.
The investment purchased approximately 5% of the company at a valuation of $4 million. A year later, FTX collapsed, Alameda and FTX went bankrupt, and the court-appointed estate sold the Cursor shares for the same $200,000 Alameda paid.
At SpaceX’s $60 billion price tag, the shares are worth $3 billion, which means the gap between the amount received by the FTX property and the return on the position today is about 15,000x. Instead, it is realized by the person who purchased the property out of bankruptcy, rather than the creditors to whom the property was meant to maximize recovery.
The timing is awkward for FTX’s receivership.
Bankman-Fried, who is currently serving a 25-year federal sentence, has spent the past year in prison arguing that FTX liquidated assets too quickly during its bankruptcy, causing its estate to lose billions of dollars in value, and that customers might have benefited more if they had held positions during the process rather than selling them when cryptocurrency prices hit bottom.
In February, he shared a forecast suggesting that FTX’s net asset value would reach $78 billion if it held on to assets during the ensuing recovery rather than selling them in 2023 and 2024.
Cursor launched its AI coding product in early 2023, the same year it sold its stake, and the company’s trajectory from that product’s launch to its current valuation three years later is one of the steepest in software startup history.
FTX clients have since been fully compensated in U.S. dollars under the bankruptcy distribution plan, recovering the value of their claims plus interest. What they didn’t get was the benefit of those assets from the bankruptcy filing to now, which equates to about $3 billion in foregone recovery in terms of the Cursor stake alone, versus $200,000 in actual realized assets.
Bankman-Fried’s parents have publicly advocated for a pardon, saying on CNN in March that FTX clients were eventually repaid and that the case against their son should be re-examined. The Vernier is likely to feature prominently in the family’s ongoing campaigning and in Bankman-Fried’s own prison correspondence, the most obvious example of his claim that the property’s value had been destroyed by the forced sale.