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FTX Bankruptcy Claims Sell for 20 Cents on the Dollar in Private OTC Markets
The sales suggest distressed asset funds are projecting recoveries of about 50 cents over five years.
Updated May 9, 2023, 4:08 a.m. Published Feb 20, 2023, 3:21 p.m.
Distressed asset funds can pick up FTX bankruptcy claims for up to 20 cents on the dollar in private over-the-counter (OTC) markets, a person familiar with the matter told CoinDesk.
FTX filed for bankruptcy protection in November after its sister company Alameda Research was blown out of levered long positions during the market downswing. Sam Bankman Fried's defunct exchange now owes its 50 largest creditors $3.1 billion.
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There are public bankruptcy markets, and they've valuing distressed FTX assets at around 16 cents on the dollar, with individual claims of up to $27 million being sold on bankruptcy marketplace XClaim.
The private OTC markets are showing similar pricing, with distressed asset funds buying in the range of 15 cents to 20 cents on the dollar, an anonymous FTX creditor told CoinDesk. "They are buying on the projection that they will only get money in five years," the person said. If the funds end up getting 25% in five years, it won't be a great trade as that's only about a 5% annual return. "I think a lot of these firms are projecting around 50 cents on the dollar recovery," the creditor suggested.
The person added that the deals are mostly private because not all claims are fungible, and the "quality" of the claim is also considered in the sale value.
"As the FTX website is currently down, it is very hard for people to prove the assets people had on the exchange," the person said. "There may also be a clawback period for those who tried to withdraw leading up to the bankruptcy, so the quality of claims is important."
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