Will FTX lose money? If you lose money, how much will you lose?

2023-09-22 13:45

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Original author: Benson Sun, former FTX Taiwan community partner

Recently, when assisting everyone in submitting claims, I am often asked a question: Will FTX lose money? If so, how much money will be lost?

The most objective way is to look at the price of secondary market debt.

Claim market. The net deposit acquisition price of FTX debt has risen to around 35%, and there is a trend of gradual increase every month.

I asked a claim buyer how they price debt claims, and they said that for cases like FTX, they expect to double their return within 5 years. This means that the current consensus among claim buyers is that the recovery rate will reach at least 70% within 5 years before they buy debt claims at a price of 35%.

PS: Note that this refers to the net deposit account, and prices may vary for other accounts. Details will be elaborated later.

FTX has now recovered assets worth $7 billion, which is in line with the $12 billion debt size, with a recovery rate of about 60%-70%. Of course, the secondary market debt buyers also make offers based on market conditions, which will change over time.

The factors of change include:

1. Can FTX retrieve more clawback from executives, donor organizations, and politicians?

2. Has the scale of the debt changed (for example, if there are black accounts that cannot submit claims due to identity factors, resulting in a reduction in the scale of the debt, or if there is suddenly a government fine that increases the scale of the debt)?

3. John Ray's proposed restructuring plan will take how long?

4. How high are the bids from FTX bidders?

5. Asset liquidation price

Additionally, it should be noted that the status of the debt itself can also affect the final amount/order of the claim, which is reflected in the secondary market price of the debt.

Factors of change include:

1. Whether there are locked tokens (such as locked FTT, locked SRM, etc.)

2. Before November 11, 2022, the account is either net deposit or net withdraw.

3. Whether there are funds in the FTX earn (the account with 5-8% interest rate)?

4. Is there any loaned asset?

Therefore, we can see from the following figure that the FTX trading debt is divided into three categories:

The acquisition prices from high to low are:

Net deposit: Net deposit within 90 days, with no clawback risk.

Minimum net withdraw: Net withdrawals within 90 days are subject to clawback risk.

Larger preference risk: Other factors may affect the order of claims.

You can log in to FTX to check the deposit and withdrawal records. Confirm the total cash flow for the 90 days before November 11, 2022, and determine whether it is a net deposit or net withdrawal. If it is the former, the clawback risk may be lower, and the subsequent claims may be more complete. Because John Ray has not yet mentioned how to clawback accounts with net withdrawals, he has only put forward an idea.

Due to the large number of FTX users, the difficulty of clawback targeting retail investors will be very high, so in the end, it may have no impact on retail investors at all, but the acquisition price of the debt market will reflect this information first. Above, I hope this answers everyone's questions.

Speaking of something unrelated to the topic

I know that many people are betting against John Ray's team, who have been sucking blood, and some of the creditors are also unhappy. Currently, I am working with these creditors to prepare something to accelerate the progress of the restructuring plan. (The good news is that the buyer of FTX is real and not a smokescreen.)

If there is more information, it will be announced to everyone.