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Jefferies sees recovery rate of up to 40% for FTX creditors: Exclusive

Quick Take

  • Investment bank Jefferies estimates a recovery rate of between 20 and 40 cents on the dollar for FTX creditors, though that could fall to 10 to 35 cents after administrator fees are paid.
  • Risks of clawbacks and lack of asset proof complicate the sale of claims.

New York-based investment bank Jefferies Financial Group estimates FTX creditors could get as much as 40% of their money. However, that recovery rate would likely be lower once bankruptcy administrators have taken their fees.

Total liabilities at FTX appear to be between $10 billion and $13 billion against assets of $2 billion to $4 billion, Joseph Femenia, global head of distressed and special situations at the bank, said in an interview. That indicates a recovery rate of between 20% and 40%, said Femenia, who has assigned a five-person team to work on FTX full-time.

Those rates could easily change as new information about the FTX balance sheet becomes known. 

Another factor in the level of payouts to users of FTX who have assets stuck on the platform will be the fees paid to lawyers and other administrators involved in the likely years-long bankruptcy process. Femenia's team expects those costs to be between $500 million to $1 billion, or around 5 and 10 cents on the dollar. That means the potential net recovery rate for FTX creditors could range from 10% to as high as 35%, a