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FTX has billions more than needed to pay bankruptcy victims
(Bloomberg) — Cryptocurrency exchange FTX has accumulated billions of dollars more than needed to cover what customers lost in the November 2022 meltdown, setting them up to receive full recoveries plus interest, a rare outcome in lawsuits bankruptcy in the USA.
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Lower-rated lenders typically receive just pennies on the dollar for their holdings, but FTX has benefited from a sharp rally in cryptocurrencies, including Solana, a token heavily backed by convicted fraudster and FTX founder Sam Bankman-Fried. The company also sold dozens of other assets, including several venture capital projects such as a stake in artificial intelligence company Anthropic.
“In any bankruptcy, this is an unbelievable outcome,” said FTX CEO John Ray, who took over the company when it went bankrupt.
FTX claims prices jumped Wednesday morning to 101 cents on the dollar from 95 cents last week, according to Cherokee Acquisition.
Once it finishes selling all of its assets, FTX will have up to $16.3 billion in cash to distribute, according to a company statement. It owes more than 2 million customers and other non-governmental creditors around $11 billion.
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The latest numbers underscore the surprising result of FTX, whose collapse has drawn comparisons to Enron Corp.’s fraud-fueled fall. and with the dismantling of Bernie Madoff’s Ponzi scheme. At the beginning of this year, the company had about $6.4 billion in cash.
There have only been a handful of major corporate bankruptcies in the US that have caused creditors to recoup all of their money in recent times. In 2021, car rental company Hertz emerged from bankruptcy with money left over to reimburse shareholders, following a sharp rise in used car prices. In 2013, the parent company of American Airlines Group Inc. also emerged from bankruptcy with a plan to distribute to shareholders and fully reimburse unsecured creditors.
Although all debts will be paid in full, plus interest, nothing will be left for shareholders, according to court documents filed Tuesday night in federal court in Wilmington, Delaware, where the FTX case is being handled. In bankruptcy, business owners cannot collect anything until all debts are paid in full. In this case, US regulators and the Internal Revenue Service have claims that are large enough to likely wipe out shareholders.
The story continues
FTX’s major shareholders include Sequoia Capital, Thoma Bravo, Singapore’s Temasek Holdings Pte and Ontario Teachers Pension Plan, according to a court document from last year. Individuals such as Tom Brady and Gisele Bündchen also own common stock.
Big recoveries
The company, now run by restructuring consultants, also proposed creating a fund to pay some creditors, including those who lent crypto to FTX, with money that would otherwise have gone to government regulators. They are also tracking the company’s assets and uncovering a network of accounts spread across the world.
These recoveries have taken a major hit due to the crypto rally, which has seen the price of Bitcoin nearly quadruple since late 2021.
Depending on the type of credit they have in the case, some creditors may be able to recover up to 142% of what is owed to them. The vast majority of customers, however, will likely get 118% of what they had on the FTX platform the day the company filed for Chapter 11 bankruptcy. Payments will likely occur over several months as FTX moves into the final stages of bankruptcy process.
Still, the prospect of such big gains is driving up the price of creditors’ claims, some of which are now trading at more than 100% of their face value, according to two people familiar with the transactions. Many of these claims traded for just three cents on the dollar shortly after the bankruptcy.
The Great Crypto Revival
The rising value of claims also reflects a notable recovery in crypto markets. Bitcoin, for example, rose to over $62,000 from around $16,000 shortly after FTX’s bankruptcy.
That has fueled discontent among some creditors, who argue they are being scammed even though they end up recovering more than the dollar value of their claims.
“In reality, I’m only getting 25% of my Bitcoin back, and that will take many years,” said Arush Sehgal of the United Kingdom, a member of FTX’s unsecured creditors committee who had more than $4 million tied up in the exchange. when it was knocked down.
Sehgal and other cryptocurrency holders missed out on a price surge because, under US bankruptcy rules, their claims are fixed at the date FTX opened its insolvency proceedings in 2022. Since then, the value of crypto assets has risen dramatically.
“All we can do as a bankruptcy team is monetize the value and distribute it,” Ray said in an interview. “We cannot create coins and tokens that do not exist. And this is the next best alternative.”
In a document filed Tuesday, the restructuring consultants laid out new details of their proposal to distribute the money to creditors and close the Chapter 11 case. Known as a disclosure statement, the document was designed to help creditors vote on the plan. proposed payment.
Such a vote is unprecedented in bankruptcy. No other case has involved so many plaintiffs, Ray said. There are more than 2 million customers and other creditors eligible to vote.
“I’ve never seen a case with 2 million customers,” Ray said. “I’ve just never seen anything like this.”
In the Enron bankruptcy, which Ray also oversaw, claims from creditors were much higher — about $50 billion — but the number of people demanding repayment was only in the tens of thousands, Ray said.
U.S. Bankruptcy Judge John Dorsey will take that vote into consideration when he decides whether to approve the plan later this summer. Dorsey is expected to hold a hearing in late June on the disclosure statement and voting procedures.
FTX filed for bankruptcy in November 2022 after Bankman-Fried closed the company’s crypto trading platform and handed control over to insolvency specialists. Bankman-Fried was later convicted of fraud.
The case is FTX Trading Ltd., 22-11068, U.S. Bankruptcy Court for the District of Delaware.
–With assistance from Lucca de Paoli and Sidhartha Shukla.
(Adds rising FTX claims prices in fourth paragraph and comments from CEO John Ray in 20th paragraph.)
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The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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