Opinion: FTX lenders will return no more than 40% of funds

Creditors of the collapsed crypto exchange FTX can return up to 40% of their funds. This forecast was given in the investment bank Jefferies Financial Group, reports The Block.

In an interview with the publication, Director of Problems and Special Situations Joseph Femenia added that this share will be even lower after paying administrative and legal fees in the process of bankruptcy of the exchange.

FTX’s total liabilities are in the range of $10-13bn, and assets are valued at $2-4bn. This gives an approximate possibility of recovering 20-40% of the funds blocked in the company, Femenia said. The numbers are subject to change as new information about the balances of the exchange becomes available.

Jefferies expects costs for lawyers, restructuring specialists and other related items to be between $500 million and $1 billion. This means a reduction in return to 10-35%.

In such cases, many creditors prefer to sell their claims without waiting for the end of the bankruptcy process, which can drag on for years. Jefferies is an active player in the emerging FTX bond market, has made several purchases and is close to completing more transactions.

According to The Block, buyers actually pay exchange creditors $0.05-0.06 for $1 of claims.

The bank allocated five employees to work on FTX. Femenia added that in the case of the exchange, there are problems with confirmation of obligations.

“Usually, in case of bankruptcy, you have a register of claims. The tricky thing with FTX is that there is no evidence right now,” he said.

The bank team is asking potential sellers to provide a package of information about the history of their assets on the platform in order to confirm the right to a refund.

Creditors of the collapsed crypto exchange FTX can return up to 40% of their funds. This forecast was given in the investment bank Jefferies Financial Group, reports The Block.

In an interview with the publication, Director of Problems and Special Situations Joseph Femenia added that this share will be even lower after paying administrative and legal fees in the process of bankruptcy of the exchange.

FTX’s total liabilities are in the range of $10-13bn, and assets are valued at $2-4bn. This gives an approximate possibility of recovering 20-40% of the funds blocked in the company, Femenia said. The numbers are subject to change as new information about the balances of the exchange becomes available.

Jefferies expects costs for lawyers, restructuring specialists and other related items to be between $500 million and $1 billion. This means a reduction in return to 10-35%.

In such cases, many creditors prefer to sell their claims without waiting for the end of the bankruptcy process, which can drag on for years. Jefferies is an active player in the emerging FTX bond market, has made several purchases and is close to completing more transactions.

According to The Block, buyers actually pay exchange creditors $0.05-0.06 for $1 of claims.

The bank allocated five employees to work on FTX. Femenia added that in the case of the exchange, there are problems with confirmation of obligations.

“Usually, in case of bankruptcy, you have a register of claims. The tricky thing with FTX is that there is no evidence right now,” he said.

The bank team is asking potential sellers to provide a package of information about the history of their assets on the platform in order to confirm the right to a refund.