Distressed crypto investor ordered to repay $1.9mn taken from failed company

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A high-profile crypto investor has been ordered by a Delaware court to pay back nearly $2mn he was found to have looted from a failed company he was appointed to oversee.

The decision on Thursday largely confirmed a court-appointed investigator’s conclusion that Thomas Braziel had appropriated funds from a listed company known as Fund.com, which were used to invest in “bankruptcy claims, cryptocurrency, leveraged loans, and high-risk equities”, as well as a Bermuda hotelier.

Braziel spent nearly $1mn of company funds on such items as a sapphire ring, diamond earrings, a watch and “luxury hotel stays, apparel, art, and other fineries”, according to the ruling from the Delaware Court of Chancery.

Braziel and his attorney did not immediately respond to requests for comment.

Braziel rose to prominence on social media devoted to digital currencies and Wall Street, describing himself on X as “the crypto distressed guy”. His firm 117 Partners specialises in brokering bankruptcy claims, a trade that had boomed in the wake of the 2008 financial crisis but had generally gone dormant in recent years.

However, claims related to failed crypto companies — especially those from FTX, the bankrupt exchange founded by Sam Bankman-Fried — have revived the market. Recently, some have proved highly lucrative. In May, FTX said account holders would receive 118 cents on the dollar for their claims, a coup for crypto investors devastated by the company’s collapse more than a year earlier.

Even before FTX agreed to pay back creditors so much, Braziel had positioned himself to broker millions of dollars worth of those claims: 117 Partners said on its website that it has brokered more than $300mn in FTX claims. In December, The New York Times featured him in a story about the “hot new market” of crypto bankruptcy claims.

Braziel had initially been tasked as receiver in 2016 to liquidate Fund.com, where he was previously an investor. He later asked and received court permission to restart the company as an investment vehicle. 

A shareholder in the company later accused him of wrongdoing as receiver, and the court appointed a special magistrate to investigate the claims, which were found to be true.

In addition to buying gems and other luxury goods, Braziel invested the ill-gotten funds, the court found. The Delaware court noted that “many of these investments produced outside gains” that could be clawed back by the company he oversaw in receivership.

The court noted that Braziel eventually mostly conceded the findings from the special magistrate, though at first had tried to cover his tracks. “Braziel also tried to conceal his self-dealing”, citing bank records he altered for tax purposes, the court said.

On Thursday afternoon, Braziel posted on X: “I’m on a wave — I’m very lucky — but I’m not letting go.”