Impatient creditors – While the team in charge of the bankruptcy of FTX tries to find all the assets of the crypto exchange to be able to repay creditors, other players began to profit from the collapse of the company.
Recovery of FTX debts: astronomical administrative costs
Joseph Femenia, executive at investment bank Jefferies Financial Group, estimates that FTX’s liabilities are between 10 and 13 billion dollars, against 2 to 4 billion dollars in assets. the collection rate receivables should therefore be between 20 and 40%.
Joseph Femenia leads the Global Difficult and Special Situations team for Jefferies Bank. He asked a team of five people to work full time on the FTX case. To estimate the company’s net debt collection rate, the team factors in the fees that the crypto exchange’s bankruptcy attorneys and administrators will collect.
It considers that these costs should be within a range of $500 million to $1 billion. Bank Jefferies then counts on a net recovery rate between 10% and 35%.
For comparison, during the liquidation of the Ponzi scheme of Bernard Madoff, the procedure cost $1.6 billion in administrative fees, which the Securities Investor Protection Company paid. The liquidation made it possible to recover more than $14.5 billion till today.
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FTX’s bankruptcy process is expected to take several more years, partly due to the lack of public data, which the company had cleaned up. According to Joseph Femenia, FTX does not have “of proof of credence at the present time”. This lack of information then complicates the verification of a debt claim.
Given all these constraints, some creditors, who do not want to be victims of the slowness of the procedures, have started to sell their debts, even if it means incurring significant losses. Jefferies Bank would be among the buyers, as would 507 Capital.
Thomas Brasilfounder of the debt buyback company 507 Capital, has noted to The Block media that the company bought several receivables from FTX between 5 and 6 cents per dollar owed.
These recovery rates will have to be reassessed on the basis of new major advances in liquidation, such as the sale of the four profitable subsidiaries of FTXwhich is expected to take place next year.
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