Key Takeaways
- Between July and October, FTX was reportedly expending around $53,000 per hour on bankruptcy lawyers and advisers.
- Under the reorganisation plan, the company plans to distribute billions of dollars as cash instead of crypto
In the latest development of FTX Trading Ltd’s bankruptcy proceedings, CEO John Ray III and the legal team at Sullivan & Cromwell have submitted an amended reorganization plan. The plan, disclosed last Friday, outlines the repayment of billions of dollars to customers and creditors, valuing their digital assets in cash at the time of the bankruptcy filing on November 11, 2022.
While the plan signals a commitment to repaying claimants, critical details, such as the distribution process and the potential resurrection of FTX’s services, remain shrouded in uncertainty.
Awaiting approval from creditors, the plan is expected to undergo detailed scrutiny in the upcoming year before it progresses to the final court approval stage. The proposed reorganization plan reflects numerous compromises aimed at achieving the best, most equitable, and economical outcome for all creditors and stakeholders in these Chapter 11 Cases, according to a statement by FTX’s debtors.
However, the financial strain on FTX becomes more apparent when considering the massive legal costs incurred during the bankruptcy proceedings. Between August 11 and October 31, the bankruptcy lawyers at FTX accrued charges totaling at least $118.1 million. Notably, management consulting firm Alvarez and Marshall led the billing, amounting to $35.8 million for three months of services, followed closely by law firm Sullivan & Cromwell with a bill of $31.8 million.
Interestingly, FTX was granted permission by the court to sell approximately $873 million worth of assets held in trust. Alongside this, the bankrupt exchange has been offloading its subsidiaries, including the earlier sale of its crypto derivatives subsidiary LedgerX for $50 million. Despite these maneuvers, concerns about the company’s financial viability persist.
The financial strain is further highlighted by the revelation that, in the three months ending October 31, FTX was reportedly expending around $53,000 per hour on bankruptcy lawyers and advisers.
Adding to the complexity, figures shared by a pseudonymous FTX creditor in a December 17 post on X (formerly Twitter) suggest that the total legal fees fully paid since the FTX bankruptcy case began is approximately $350 million. This figure provides a more comprehensive view of the substantial financial commitments made by FTX in navigating the legal intricacies of the bankruptcy process.
Additionally, the filing highlights the conviction of FTX founder Sam Bankman-Fried for orchestrating a massive fraud that led to the collapse of the FTX exchange. The company filed for bankruptcy last year after Bankman-Fried agreed to turn over control of his empire to restructuring professionals.
