5 ms·

Dumb question: why are creditors getting paid more than they are owed?

teractiveodular 2y ago
Interest. From the article: > "We are poised to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors." For what it's worth, the article also points out that Bitcoin has gone up 260% since FTX's failure, so if FTX had not collapsed, somebody hodling their BTC there might have earned 260% instead of 19%.
- listenallyall 2y ago
  The creditors are only "earning" 19%. The first 100% is their own investment. The comparison you are trying to make is 260% vs 19%, not 119%.
  - teractiveodular 2y ago
    Thank you, corrected!
- Nursie 2y ago
  Thankfully for the investor, the non-cryptocurrency assets generated enough return to make them whole and even give them a profit.
  - ToValueFunfetti 2y ago
    If bitcoin is up 260%, the non-cryptocurrency assets must bringing the average return down, right?
    - Nursie 2y ago
      From what I’ve read there wasn’t really that much bitcoin left by the time they were shuttered, and their own tokens were worthless. That’s part of the whole issue - SBF was just doing whatever he felt like with customer assets and balances. Plus inventing assets out of thin air. The profit that people will get has largely been driven by FTX’s investments in AI stuff, which turn out to have done great. Think about it this way (exaggerated to make a point) - you give SBF $10k to buy Bitcoin on FTX. You expect him to have that amount of BTC locked away somewhere for you. Instead he blows your $10k on houses for himself, giving money to politicians, sponsoring sports grounds and buying stuff for his parents. He’s throws some of it into AI firms. At the time of bankruptcy all he’s actually holding for you is $200 of BTC. That goes up in value to $460. W00t. But wait, two years later those few million he threw at AI seemingly for shits and giggles are now worth a few billion, so you can be made whole and even get a little profit.
      - Nursie 2y ago
        LOL, got my maths a bit wrong there, 260% growth of $200 would be $720, not $460. Doesn't change the overall picture though :)
- cpitman 2y ago
  Yeah, this is not creditors "making money". Anyone who had 1 bitcoin in FTX is not getting their 1 bitcoin back, which is massively more valuable. Instead, they are getting 119% of the USD value of a bitcoin in late 2022. They are massively losing out. They are effectively getting back 33% of their assets.
  - Scoundreller 2y ago
    aren't a lot of the FTX creditors cash creditors? they're definitely making money. Dunno what the breakdown between bitcoin and cash creditors are, but the only way to make bitcoin creditors more whole would be to stiff the cash creditors. And the FTX token creditors are making [DIVIDE BY ZERO]
    - csomar 2y ago
      One way to think about it, is that if FTX was whole, then it's 119% cash (since that's the where the 19% is coming from).
- tiffanyh 2y ago
  But this assumes the person wouldn’t have withdrawn their funds, during that period of time.
  - clhodapp 2y ago
    They could also have withdrawn their funds and invested them in something else.
- Nursie 2y ago
  FTX didn’t have their BTC though. That’s part of the problem.
cma 2y ago
If your ming vase is stolen should you get it back after it appreciated, or the thief gets the upside and you just get cash as if it were a forced sale at theft time? Not an exact analogy but I think it at least shows there is a spectrum of situations to consider.
kortilla 2y ago
You’re asking why the creditors are getting their assets back
- immibis 2y ago
  but they aren't
Scoundreller 2y ago
dunno why nobody has answered your real question, which I think is: "Why aren't debt creditors getting made whole (as of date of bankruptcy) with the balance going to equity holders, like every other bankruptcy?"
arder 2y ago
This was covered in some of the coverage much earlier about the bankruptcy proceedings. Essentially it's within the court's power to not only pay the creditors but to pay them interest on their losses if that's possible. That's obviously balanced against the rights of the equity holders to get back any value if there is any equity left. In this specific case the people with equity were: the fraudsters who ran the scam, venture capitalists. No one wants to pay off the fraudsters and the VCs would rather pretend this whole thing didn't happen (because it makes them look like drunken coked up degenerate gamblers on a weekend at Vegas) so everyone agreed the court should be generous with how they calculate the return to customers. Government entitires also have a claim for any fines or taxation or whatever, but they're relatively happy for the retail customers to be protected first too - but they care less about the equity getting wiped out. My guess would be anything above what the customers get may well go out to government fines rather than returning to the equity holders.

Interest. From the article: > "We are poised to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors." For what it's worth, the article also points out that Bitcoin has gone up 260% since FTX's failure, so if FTX had not collapsed, somebody hodling their BTC there might have earned 260% instead of 19%.

listenallyall 2y ago
The creditors are only "earning" 19%. The first 100% is their own investment. The comparison you are trying to make is 260% vs 19%, not 119%.
- teractiveodular 2y ago
  Thank you, corrected!
Nursie 2y ago
Thankfully for the investor, the non-cryptocurrency assets generated enough return to make them whole and even give them a profit.
- ToValueFunfetti 2y ago
  If bitcoin is up 260%, the non-cryptocurrency assets must bringing the average return down, right?
  - Nursie 2y ago
    From what I’ve read there wasn’t really that much bitcoin left by the time they were shuttered, and their own tokens were worthless. That’s part of the whole issue - SBF was just doing whatever he felt like with customer assets and balances. Plus inventing assets out of thin air. The profit that people will get has largely been driven by FTX’s investments in AI stuff, which turn out to have done great. Think about it this way (exaggerated to make a point) - you give SBF $10k to buy Bitcoin on FTX. You expect him to have that amount of BTC locked away somewhere for you. Instead he blows your $10k on houses for himself, giving money to politicians, sponsoring sports grounds and buying stuff for his parents. He’s throws some of it into AI firms. At the time of bankruptcy all he’s actually holding for you is $200 of BTC. That goes up in value to $460. W00t. But wait, two years later those few million he threw at AI seemingly for shits and giggles are now worth a few billion, so you can be made whole and even get a little profit.
    - Nursie 2y ago
      LOL, got my maths a bit wrong there, 260% growth of $200 would be $720, not $460. Doesn't change the overall picture though :)
cpitman 2y ago
Yeah, this is not creditors "making money". Anyone who had 1 bitcoin in FTX is not getting their 1 bitcoin back, which is massively more valuable. Instead, they are getting 119% of the USD value of a bitcoin in late 2022. They are massively losing out. They are effectively getting back 33% of their assets.
- Scoundreller 2y ago
  aren't a lot of the FTX creditors cash creditors? they're definitely making money. Dunno what the breakdown between bitcoin and cash creditors are, but the only way to make bitcoin creditors more whole would be to stiff the cash creditors. And the FTX token creditors are making [DIVIDE BY ZERO]
  - csomar 2y ago
    One way to think about it, is that if FTX was whole, then it's 119% cash (since that's the where the 19% is coming from).
tiffanyh 2y ago
But this assumes the person wouldn’t have withdrawn their funds, during that period of time.
- clhodapp 2y ago
  They could also have withdrawn their funds and invested them in something else.
Nursie 2y ago
FTX didn’t have their BTC though. That’s part of the problem.

cma 2y ago

If your ming vase is stolen should you get it back after it appreciated, or the thief gets the upside and you just get cash as if it were a forced sale at theft time? Not an exact analogy but I think it at least shows there is a spectrum of situations to consider.

kortilla 2y ago

You’re asking why the creditors are getting their assets back

immibis 2y ago
but they aren't

Scoundreller 2y ago

dunno why nobody has answered your real question, which I think is: "Why aren't debt creditors getting made whole (as of date of bankruptcy) with the balance going to equity holders, like every other bankruptcy?"

arder 2y ago

This was covered in some of the coverage much earlier about the bankruptcy proceedings. Essentially it's within the court's power to not only pay the creditors but to pay them interest on their losses if that's possible. That's obviously balanced against the rights of the equity holders to get back any value if there is any equity left. In this specific case the people with equity were: the fraudsters who ran the scam, venture capitalists. No one wants to pay off the fraudsters and the VCs would rather pretend this whole thing didn't happen (because it makes them look like drunken coked up degenerate gamblers on a weekend at Vegas) so everyone agreed the court should be generous with how they calculate the return to customers. Government entitires also have a claim for any fines or taxation or whatever, but they're relatively happy for the retail customers to be protected first too - but they care less about the equity getting wiped out. My guess would be anything above what the customers get may well go out to government fines rather than returning to the equity holders.