Famous distressed-debt tycoons are rushing into the FTX bankruptcy claims space, collecting loans at steep discounts with hopes of making huge profits. According to court records, Silver Point Capital, Diameter Capital Partners, and Attestor Capital have purchased FTX claims totaling more than $250 million this year.
According to a report, investment heavyweights have acquired $250 million in FTX claims.
The market for FTX debt has exploded as lawyers uncover assets. This Thursday, Jeremy Hill of Bloomberg highlighted that some of these claims are currently trading for more than 30 cents on the dollar. Investors can purchase unpaid claims at bargain costs on the unexplored market for bankruptcy claims. Claims from insolvent companies like FTX are frequently bought for pennies on the dollar.
According to data from Claims Market, as of September 15, 2023, FTX claims were hovering at 33% of net worth. This is a bit less than the claims associated with the bankruptcy of cryptocurrency lender Celsius Networks, which had recently traded at around 34 cents on the dollar. According to claims-market.com, claims from Genesis Global Capital are currently selling for about 50% of their total value.
others created careers out of Lehman and Madoff, and I believe that many others view FTX as a similar opportunity. Bloomberg was informed on Thursday by bankruptcy claim investor Thomas Braziel. He made allusion to debt trades from the bankrupt Lehman Brothers and the infamous Bernie Madoff Ponzi scheme. Braziel added the following:
I think that the men who are investing in these dockets are among the most intelligent individuals in trouble.
Investors that suffered losses as a result of the Mt. Gox scandal historically sold their assets for less than the amount of the claim. In the midst of bankruptcy proceedings, Bernie Madoff's victims traded claims with opportunists. According to a research, most of the sellers who traded claims from Madoff's pyramid scheme were ordinary people.
The most significant business meltdowns are followed by claims trading, while blue-chip investment companies often avoid minor bankruptcies. Heavyweight investors have been drawn in by FTX's obvious collapse and the discovery of billions in crypto assets. Additionally, attorneys have recovered money that was allegedly lost on shady transactions carried out by Sam Bankman-Fried and others connected to FTX.
In the financial history books, the Enron scandal represented a gigantic corporate bankruptcy, and those claims also sold at significant discounts. The main tactic? Unsettled FTX bills are being purchased on the cheap by investors who want to recover more than their initial investment. Resolutions of bankruptcy cases may take a while, raising doubt on FTX's true value. However, for seasoned distressed debt enthusiasts, the potential huge profits outweigh the risks.
What do you think about the $0.33 per dollar price tag placed on FTX claims? Post your ideas and viewpoints on this topic in the comments area below.