FTX Bankruptcy Spurs $1.3 Million Daily Legal Expense, Raising Creditor Concerns

The bankruptcy of FTX, a notable digital asset exchange, has resulted in exorbitant legal costs, drawing attention as creditors strive to reclaim their funds. Court documents reveal that FTX has incurred over $118 million in legal fees between August and October alone, with investors and creditors still awaiting the return of their assets.

The legal expenses average around $53,000 per hour, amounting to over $1.3 million per day, as indicated in the court filings. These fees encompass not just legal services but also charges by other professionals such as accountants during the bankruptcy proceedings.

Breakdown of Legal Fees

Sullivan and Cromwell, a firm involved in the bankruptcy process, has been a focal point of discussions within the crypto community for months. In the three months highlighted, the firm billed $31.8 million for various professional services, including electronic discovery and paperwork, at an hourly rate of $1,230.

Alongside Sullivan and Cromwell’s substantial fee, Alvarez and Marshall billed the highest at $35.8 million, contributing to a cumulative expense of over $109 million. Additionally, Quinn Emanuel and AlixPartners charged $10.4 million and $13.3 million, respectively, during the same period.

The Fallout of FTX’s Collapse

FTX’s implosion in November 2022, which resulted in billions of dollars in investor losses, has intensified regulatory scrutiny and led to plummeting asset values. The ensuing bankruptcy has sparked a range of legislative responses aimed at better protecting investors while potentially impacting market sentiment and adoption.

The Staggering Cost of Bankruptcy

The recent turmoil in the crypto sector, fueled by macroeconomic factors and internal policies, has led to bankruptcy-related expenses reaching $700 million. A New York Times report highlights how lawyers, accountants, and other professionals have profited immensely from this financial turmoil.

FTX, along with its affiliate Alameda Research, has incurred over $326 million in fees since filing for bankruptcy. Alvarez and Marshall, Sullivan and Cromwell, and Kirkland & Ellis have billed $126 million, $111 million, and $103 million, respectively.

Creditors’ Frustration Over Rising Costs

As legal and professional fees continue to escalate, creditors and victims express frustration, deeming the charges excessive and detrimental to those who have lost significant savings.

Daniel Friesberg, a 19-year-old investor, voiced concerns about the excessive number of professionals involved in the cases, stating, “At every hearing, they have an army of people there, and most of them don’t need to be there. You don’t need 20 people taking notes.” This sentiment reflects the growing discontent among those affected by FTX’s bankruptcy.