- The FTX bankruptcy has raised concerns over excessive legal fees, with former SEC official John Reed Stark likening the reorganization plan to “highway robbery” so lawyers can profit.
- Lawyers and advisors have billed over $200 million in fees from November 2022 to June 2023, with FTX spending $53,000 per hour on fees in October and over $100 million in fees in just 11 days in December.
- FTX is now seeking to sell assets like a $175 million claim against Genesis to raise funds to cover legal fees, even as victims have yet to receive compensation and relaunching FTX seems unlikely.
The bankruptcy of crypto exchange FTX has raised alarm bells over the substantial profits made by the legal team during the proceedings. Despite extensive efforts, FTX will not relaunch, leaving many questioning whether the legal fees were justified.
Former SEC Official Sounds the Alarm
John Reed Stark, a former SEC official, likened the FTX reorganization plan to “highway robbery.” He suggested the plan was a way for lawyers to profit from the bankruptcy rather than help victims. Stark sarcastically said each lawyer could likely afford a new beach house in 2024.
Over $200 Million in Fees Since November
Lawyers and advisors have billed over $200 million in fees from November 2022 to June 2023. The court-appointed examiner deemed the fees reasonable for now in a June report. However, FTX spent $53,000 per hour on fees in October 2023. From December 5-16, 2023, the team billed at least $118 million, averaging $13 million per day.
FTX Seeks to Sell Assets to Cover Fees
On February 1, FTX requested selling its $175 million claim against Genesis to raise funds. The associated hedge fund Alameda owns the claim tied up in Genesis’ FTX account. If approved, FTX can sell the claim in parts at optimal times.
Conclusion
While legal fees are typical in bankruptcies, FTX’s excessive costs have raised concerns. As the legal team profits, victims have yet to receive compensation. The feasibility of relaunching FTX appears dubious given the circumstances. With more assets now potentially being sold off, the legal team’s windfall remains under scrutiny.
