An Unusually Costly Bankruptcy
The bankruptcy of FTX, a crypto exchange platform, is shaping up to be one of the most expensive ones in history. The initial months have witnessed an astounding accumulation of legal fees, scrutinized by an auditor who maintains that the steep cost is justified given the magnitude of the restructuring.
Mammoth Task Justifies High Legal Fees
In just over seven months since FTX declared bankruptcy, the lawyers and restructuring team associated with the case have charged more than $200 million. The eye-popping figure, though high, makes sense when considering the extent of the task at hand, argues an independent auditor.
Not ‘Wholly Unreasonable’
Court-appointed fee examiner Katherine Stadler examined the legal fees over the first few months following FTX’s bankruptcy declaration. She concluded that while the costs were significant, they were not “wholly unreasonable in the moment.”
Remarkable Circumstances Surrounding FTX
The circumstances surrounding the FTX case are exceptional, considering the “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.”
A Glowing Review of the Restructuring Team
Stadler also commended the FTX restructuring team, noting the effective action taken by the professionals in turning around the state of the company.
Breakdown of Legal Fees
Stadler’s report further detailed the hourly rates charged by the law firms involved, highlighting New York-based Sullivan & Cromwell and consultants Alvarez & Marshal as the highest earners.
Advice from the Auditor
In closing, Stadler highlighted the importance of a “cost-conscious and cost-effective” Chapter 11 process, emphasizing the potential for better outcomes for creditors through careful management of administrative expenses.
Looking Ahead Amid High Bankruptcy Costs
As the bankruptcy case of FTX continues to unfold, the steep costs incurred underscore the intricacy of handling financial restructuring within the largely unregulated world of cryptocurrency. The findings of Auditor Katherine Stadler, while recognizing the high fees as remarkable, also highlight the remarkable performance by the team of professionals working tirelessly on this mammoth task.
Despite the costs, Stadler’s emphasis on maintaining a cost-effective process and being conscious of administrative expenses provides a blueprint for handling such cases in the future. It is a reminder that while the bankruptcy of a global crypto exchange like FTX is bound to be costly, effective management and fiscal responsibility are key to ensuring the best outcomes for creditors.
As the world watches, the FTX case serves as an important precedent for similar situations that may arise in the fast-paced and often unpredictable world of cryptocurrency. Despite the staggering legal fees, Stadler’s examination reveals that a careful, diligent approach can yield positive results, even in the face of monumental challenges.
