FTX claims rise above 100 cents on the dollar on back of bankruptcy plan

FTX claims have risen above 100 cents on the dollar following the estate’s draft recovery plan that estimates the majority of creditors will see a recovery rate of 118%.

For instance, crypto bankruptcy site Xclaim shows that FTX claims are now going for between 101% and 112%.

“It's absolutely unbelievable,” said Thomas Braziel, a partner at 117 Partners and 507 Capital and an investor in distressed assets. “I mean, Lehman was 141 cents on the dollar, and that took 10 years. This is 142% as the projected high number. For the majority in terms of number of creditors, there's still some stuff to iron out but claims are pricing over 100; even small claims are basically pricing up to 100.”

Braziel said claims have been picking up since the draft plan went out, with interested parties reaching out to him today including a $125 million claimant, a $40 million claimant and a $10 million claimant. 

He argued that since distressed asset investors own a significant portion of the docket and that there’s a large percentage of claims in stablecoins, it’s unlikely there will be a successful pushback on the plan. “It kind of puts a nail in the coffin of guys trying to push for crypto upside,” he said.

Earlier Wednesday, Sunil Kavuri, a representative of the largest FTX creditor group, recommended voting against the bankrupt crypto exchange’s reorganization plan. He continued to argue that the estate should pay out cryptocurrencies in kind rather than the dollar value when the exchange filed for bankruptcy.

Claim buying on the rise

Louis Origny, CTO of claim buyer FTXCreditor, which has bought over 2,100 claims so far, is anticipating that claim buying will increase now that the draft plan has been released.

Origny gave two reasons for this. He noted that the disclosure statement for the bankruptcy plan includes language around an up to 30% tax withholding rate for non-U.S. customers, which could encourage holders to sell their claims on the secondary market instead. Plus, he claimed that not all holders will be able to cash USD checks. 

“We expect to have significantly more volume,” he told The Block. “We are bracing for it.”