The amount of legal fees, which exceeded $200 million in the first few months of FTX’s bankruptcy, was audited by an auditor who called it an amazing fee for an amazing service.
Fees for lawyers and the restructuring team at crypto-currency exchange FTX have exceeded $200 million in seven months, but an independent auditor believes this is justified given the scale of the task.
On June 20, court-appointed expert Catherine Stadler presented a 47-page report on the fees charged by law firms in the three months or so following FTX’s bankruptcy on November 11, and concluded that they were “not totally unreasonable at this time”.
She pointed to the “virtually unregulated financial system” in which FTX operated, and added that the case was “remarkable” because the exchange had “global reach, a total absence of corporate documentation and even the foundations of corporate governance”.
Stadler confirmed that the team working on FTX had “requested more than $200 million in fees” since its bankruptcy in November:
“Despite the relative scale of the known pool of assets, these proceedings appear likely to be very expensive by any standard.”
She praised the work of FTX’s restructuring team, saying she was “amazed” by those who “immediately jumped into the fray” to “start transforming a smoldering pile of rubble”.
“The costs incurred to date are staggering, indeed, so is the work of the specialists.
“Very few companies could have achieved what these professionals did in 90 days,” added Stadler.
Charging by the hour
Stadler’s report details the fees charged by law firms in the first few weeks after FTX filed for Chapter 11 bankruptcy.
It shows that the hourly rates of the 242 lawyers working on the case ranged from $388 to $2,165, with 46 lawyers earning more than $2,000 an hour.
New York-based law firm Sullivan & Cromwell was the top earner, with nearly $42 million in fees and expenses.
It was followed by consulting firm Alvarez & Marshal, which received over $28 million in fees and expenses.
Cointelegraph previously analyzed the accounts of the five companies involved in the litigation and found that they billed a total of more than $100 million in the first quarter of 2023.
Mr. Stadler offered some advice, stating that “careful management of administrative costs will lead to a better outcome for creditors” as well as a “cost-effective and efficient” Chapter 11 process.
Bankman-Fried, who goes on trial in October, had already challenged Sullivan & Cromwell’s appointment as FTX’s attorney after FTX filed for Chapter 11 bankruptcy protection last November, arguing that her work on the stock exchange before its collapse prevented the firm from acting impartially.
In January, Delaware Bankruptcy Judge John Dorsey dismissed a similar lawsuit brought by two FTX clients, saying there was “no evidence of an actual conflict”.
Lawyers for the former crypto-currency tycoon, who has pleaded not guilty to the federal charges against him, also claimed that FTX’s debtors were acting improperly as an arm of justice by assisting prosecutors and withholding information from the defense team.
As part of the bankruptcy proceedings, FTX has up to a million potential creditors, including former customers, suppliers and lenders, who will have to compete for priority in receiving payments from the company’s remaining assets.