• FTX’s collapse has benefitted the many law firms and consultants hired to untangle the mess left by its founder, Sam Bankman-Fried.
• Court filings from Wednesday detailed the fees charged by lawyers, tax advisers, and restructuring specialists.
• There is a jurisdictional fight between the U.S. lawyers and the Bahamas government, which could delay the repayment of creditors.
The collapse of the crypto exchange FTX has left few winners, with founder Sam Bankman-Fried in FBI custody and as many as 1 million creditors still waiting to get their money back. However, one group has certainly profited from the situation: the law firms and consultants hired to untangle the mess.
Court filings issued Wednesday revealed the extent of the fees charged by the various legal and financial services hired to assist FTX. The filings showed that FTX’s New York-based law firm Sullivan & Cromwell charges as much as $2,165 an hour for work by partners and special counsel. In the three months prior to the company’s collapse, S&C received some $3.4 million, most of which was paid on Nov. 3.
Meanwhile, staff at financial advisers Alvarez and Marsel charge an hourly rate of as much as $1,375, and received $4 million in retainers prior to the bankruptcy. The company’s new CEO, John J. Ray III, charges a similar hourly rate, and will receive a bonus of $3 million upon completion of the Chapter 11 bankruptcy plan. Other law firms, restructuring specialists, and tax advisers will also claim their stake, according to the court filings.
The sums paid out to these services pale in comparison to the size of the estate. Lawyers and staff are currently trying to safeguard over $1 billion in cash, plus other assets such as cryptocurrency and real estate.
However, Bahamas Attorney General Ryan Pinder has claimed that something untoward is going on by the U.S. lawyers involved in the bankruptcy. He believes that their legal strategy and intemperate statements are driven by the prospect of multi-million-dollar legal and consultant fees. For their part, FTX’s lawyers have accused the Bahamas government of seeking to control the entire bankruptcy proceedings, and of having “colluded” with the now-jailed Bankman-Fried.
In congressional testimony last week, Ray said his goal is to maximize value for customers and creditors. However, a dispute over jurisdiction that spirals into an international incident could delay the repayment of creditors, and only increase the hefty legal bills.
Ultimately, the goal of the legal and financial services hired is to ensure that FTX’s creditors get their money back. However, with the sums involved, it is clear that the many law firms and consultants will be the ones to benefit the most from the collapse of the crypto exchange.