Former U.S. Securities and Exchange Commission (SEC) official John Reed Stark has indicated that the company restructuring plan might serve as a means for the legal team to benefit from the bankruptcy process. In a post on the social media platform X, Stark suggested that all FTX customers should be sent a sarcastic “Thank You” note from the now-defunct exchange’s legal team, considering the significant profits it accrued during bankruptcy proceedings. Stark also humorously remarked that each member of the legal team might be able to acquire a new beach house in 2024.
FTX Goes Chapter 7 — and FTX Bankruptcy Lawyers Are Probably Heading to the Beach in 2024
The FTX bankruptcy team’s lawyers should send thank you notes to all FTX customers. Why? Because thanks to the FTX customers, each member of the FTX legal bankruptcy team can now probably… pic.twitter.com/P89w5tS54y
— John Reed Stark (@JohnReedStark) February 3, 2024
During a Jan. 31 hearing in the U.S. Bankruptcy Court for the District of Delaware, FTX lawyer Andy Dietderich of Sullivan & Cromwell clarified that, despite extensive efforts, there were no intentions to relaunch the company — referred to as FTX 2.0 — within the Chapter 11 bankruptcy framework. Stark had anticipated that the Chapter 11 reorganization plan was unlikely to succeed. He likened restructuring the company to attempting to reorganize a combination of “Murder Incorporated, The Cali Drug Cartel, and Madoff Investment Advisory Services”.
FTX Massive Legal Fees!
Attorneys and the restructuring team overseeing the bankrupt crypto exchange generated over $200 million in fees from November 2022 to June 2023. The court-appointed fee examiner, Katherine Stadler, found the fees “not wholly unreasonable at the moment” in a report filed on June 20, 2023. However, in the quarter ending Oct. 31, 2023, FTX spent approximately $53,000 per hour on legal and advisory fees, according to recent compensation filings. Documents from Dec. 5 to Dec. 16, 2023, revealed that the bankruptcy legal team invoiced at least $118.1 million from Aug. 1 to Oct. 31, 2023, averaging $1.3 million per day or $53,300 per hour over the 92 days.
On Feb. 1, the company submitted a request in a Delaware court to sell its $175 million claim against the bankrupt Genesis Global Capital. The associated hedge fund, Alameda Research, holds the claim. If approved, the company can sell the claim in its entirety or in parts, timing the sales for optimal conditions.
Restarting The Exchange
FTX collapsed in November 2022 after irregularities were discovered in its accounts. Genesis had $175 million tied up in its account at the time, which it asserted did not impact its market-making activities.
The company’s representatives announced that they were considering the possibility of restarting the crypto exchange. However, first the site needs to pay off its debt to creditors. In December, the platform unveiled a debt restructuring plan, saying that the assets of affected customers would be valued at the exchange rate of November 2022, when BTC was worth $17,000. Later, the head of the US Securities and Exchange Commission (SEC) Gary Gensler said that restarting the platform was quite possible. The main thing, he said, is that the entire procedure takes place “within the framework of the law.” Then the FTT price flew up by more than 80%.
