Legal and Restructuring Fees in FTX Bankruptcy Case: A Necessary Burden or Exces...

The costly maze of bankruptcy proceedings has seen the legal and restructuring fees about the insolvency case of the beleaguered cryptocurrency exchange, FTX, skyrocket past the $200 million mark within just seven months. While the seemingly gargantuan figure has raised eyebrows in many quarters, independent auditors advocate its reasonableness, considering the arduous task.

The Not-so-irrational Charges in the FTX Debacle

A court-appointed fee examiner, Katherine Stadler, presented a comprehensive 47-page report on June 20, dissecting the fees charged by the involved law firms over three months post the bankruptcy declaration of FTX on November 11. In her analysis, she deemed the charges not to be “entirely disproportionate considering the circumstances.”

Stadler shed light on the “predominantly unregulated financial ecosystem” within which FTX operates. The peculiarity of the case was underscored by the exchange’s “worldwide influence, the glaring lack of corporate documentation, and the missing rudimentary corporate governance.”

Monumental Fee Requests amidst Challenging Circumstances

Stadler confirmed that the team grappling with the FTX case had “sought upwards of $200 million in fees” since its bankruptcy declaration in November. She further noted:

“Despite the relative size of the known asset pool, these proceedings seem destined to bear hefty expenses by any standards.” Her assessment of the FTX restructuring team was largely positive, expressing her amazement at the swift action taken to “commence the transformation of the metaphorical pile of rubble.”

“The fees incurred thus far are extraordinary, but the performance of the professionals involved mirrors this sentiment.” “Scant few firms could have achieved what these professionals have managed in a mere 90 days,” Stadler added.

Dissecting the Hourly Rates and the Major Earners

Stadler’s report also provided a detailed breakdown of the fees levied by the law firms in the initial weeks following FTX’s filing for Chapter 11 bankruptcy.

The report highlighted that the hourly charges for the 242 lawyers working on the case varied significantly, from $388 to $2,165. A sizeable contingent of 46 lawyers were charged upwards of $2,000 per hour.

The lion’s share of the earnings went to the New York-based law firm, Sullivan & Cromwell. The firm commanded a sizable fee, amassing approximately $42 million in charges and expenses during this period.

Close on their heels were consultants Alvarez & Marshal, who managed to secure over $28 million in charges and expenses.

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