The Enron shareholders were last in line for any distributions and surely got nothing through the bankruptcy process. However, they owned their own claims for violations of the securities laws designed to protect investors. Those claims were not part of the bankruptcy estate because they were not owned by Enron. However, they did not have many strong targets for the vindication of those claims, so they only got 7%. If there had been a clearly liable and super-deep-pocketed target—say, someone central to committing securities fraud was secretly a trillionaire—they would potentially have collected 100%.
My point is that the rate of recovery is often primarily determined by (1) how deep the pockets of potential defendants are and (2) how good those defendants’ defenses are. I am suggesting that the FTX depositors—no matter how clearly their rights were violated—may not have many deep pockets to sue who lack good defenses. I haven’t heard any identification of any deep pockets without good defenses, or information that would lead me to believe they likely exist. Hence my suggestion that the depositors’ fate will be closer to pennies on the dollar than to near-full recovery.
Reporting from Bloomberg suggests that depositor claims are being sold at 5-8 cents on the dollar, which suggests that the market agrees that substantial recovery is unlikely. The market could of course be wrong, but these folks are experts in purchasing debt claims against bankruptcy companies. They have doubtless thought harder about potential avenues for recovery thanme or anyone else posting on an EA forum.
Yeah, sorry, I buy the overall claim that FTX debt is sold cheaply, and this is strong evidence that recovery is unlikely, but I still think reasoning from analogy from the Enron shareholders to the FTX depositors seems wrong to me.
The Enron shareholders were last in line for any distributions and surely got nothing through the bankruptcy process. However, they owned their own claims for violations of the securities laws designed to protect investors. Those claims were not part of the bankruptcy estate because they were not owned by Enron. However, they did not have many strong targets for the vindication of those claims, so they only got 7%. If there had been a clearly liable and super-deep-pocketed target—say, someone central to committing securities fraud was secretly a trillionaire—they would potentially have collected 100%.
My point is that the rate of recovery is often primarily determined by (1) how deep the pockets of potential defendants are and (2) how good those defendants’ defenses are. I am suggesting that the FTX depositors—no matter how clearly their rights were violated—may not have many deep pockets to sue who lack good defenses. I haven’t heard any identification of any deep pockets without good defenses, or information that would lead me to believe they likely exist. Hence my suggestion that the depositors’ fate will be closer to pennies on the dollar than to near-full recovery.
Reporting from Bloomberg suggests that depositor claims are being sold at 5-8 cents on the dollar, which suggests that the market agrees that substantial recovery is unlikely. The market could of course be wrong, but these folks are experts in purchasing debt claims against bankruptcy companies. They have doubtless thought harder about potential avenues for recovery thanme or anyone else posting on an EA forum.
Yeah, sorry, I buy the overall claim that FTX debt is sold cheaply, and this is strong evidence that recovery is unlikely, but I still think reasoning from analogy from the Enron shareholders to the FTX depositors seems wrong to me.