In April 2023, the bankruptcy estate of FTX sold a 5% stake in AI coding startup Cursor for $200,000, a valuation that has since skyrocketed to approximately $3 billion following SpaceX's decision to acquire the company at a $60 billion valuation. This staggering increase has brought attention to the significant missed recovery for FTX's creditors.
SpaceX's acquisition is part of Elon Musk's efforts to enhance his company's AI coding capabilities, an area where he believes xAI, his AI company, is lagging behind competitors. The deal includes a provision for SpaceX to purchase Cursor for $60 billion or pay a $10 billion breakup fee if the acquisition does not proceed.
The crypto aspect of the deal involves Alameda Research, which invested $200,000 in Anysphere, the company behind Cursor, in April 2022. This investment, which was sold by the FTX estate for the same amount a year later, would now be worth $3 billion, representing a 15,000x return. The realization of this return, however, went to the buyer of the stake rather than FTX's creditors, sparking controversy over the handling of the company's assets during its bankruptcy. Sam Bankman-Fried, currently serving a prison sentence, has argued that the estate's liquidation of assets too quickly resulted in the destruction of billions of dollars in value, which could have been preserved if the assets had been held onto.
The case of the Cursor stake has become a prime example of the potential value that could have been realized if the estate had adopted a different approach to asset management. Meanwhile, FTX customers have been repaid in full, but they have not benefited from the significant upside of the assets sold during the bankruptcy process, including the substantial increase in the value of the Cursor stake.