Cryptocurrency News

FTX bankruptcy will be ‘very expensive’ but there’s a reason: Auditor



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Fees charged by the lawyers and the restructuring team working on the bankrupt crypto exchange FTX have topped $200 million in just over seven months, but an independent auditor argues it makes sense, given the mammoth task.

On June 20 the court-appointed fee examiner, Katherine Stadler, filed a 47-page report on the fees charged by the law firms in the roughly three months after FTX’s Nov. 11, 2022 bankruptcy date and concluded they were not “wholly unreasonable in the moment.”

She remarked on the “largely unregulated financial system” in which FTX operates, adding the case was “remarkable” for the exchange’s “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.”

Stadler confirmed the team working on FTX had “requested more than $200 million in fees” since its November bankruptcy, adding:

“Notwithstanding the relative scope of the known asset pool, these proceedings appear on track to be very expensive by any measure.”

She gave a glowing review of the FTX restructuring team saying she was “struck” by those who “sprung into action” to “begin transforming a smoldering heap of wreckage.”

“The fees incurred to date are remarkable, but so is the professionals’ performance.”

“Very few firms could have accomplished what these professionals accomplished in 90 days,” Stadler added.

Charging by the hour

Stadler’s report broke down the fees charged by the law firms in the first weeks after FTX filed for Chapter 11 bankruptcy.

It said hourly rates for the 242 lawyers on the case ranged from $388 to $2,165 and 46 lawyers were on more than $2,000 an hour.

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New York-based law firm Sullivan & Cromwell has walked away with the biggest paycheck having charged around $42 million in fees and expenses over that time.

Consultants Alvarez & Marshal were next in line, pocketing over $28 million in fees and expenses.

Previously, Cointelegraph analyzed the billings of the five firms involved in the proceedings and found they collectively invoiced over $100 million in the first quarter of 2023.

Stadler added some advice, saying “careful stewardship of administrative expenses will translate to a better outcome for creditors” along with a “cost-conscious and cost-effective” Chapter 11 process.

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