- FTX bankruptcy legal fees are nearly $1 billion, making it one of the most expensive cases in U.S. history.
- Even with high costs, most FTX customers will get back 118% of their money.
- Crypto bankruptcies show the need for better rules to control legal costs.
FTX bankruptcy case has proved to be the costliest in U.S. history to date, as attorneys’ fees amount to close to $1 billion. Nearly $948 million payments to attorneys and money managers have already been made, with authorized total fees amounting to more than $952 million, court documents show.
In spite of the expense, FTX bankruptcy made the refund payments to clients, with another payment cycle in April and May through Kraken and BitGo. Specialists say the increased legal fees were worth it because lawyers traced billions of dollars in money that was broken up across various accounts.
Enormous Fees for Financial and Law Firms
Financial and law firms dealing with the case have collected enormous fees. Sullivan & Cromwell LLP, the lead law firm of FTX, has received over $248.6 million, while Alvarez & Marsal, the financial advisor, has been compensated over $306 million.
The advisors who work for FTX clients have charged over $110.3 million, and interim CEO John Ray, who came on board after the collapse, has received over $8 million. The case continues as legal teams continue to dig through books of accounts to recover more assets for creditors. There are also outstanding lawsuits, including a huge $1.8 billion lawsuit against Binance.
FTX Bankruptcy Is More Expensive
FTX bankruptcy is much more expensive than the other failed crypto firms. Celsius, BlockFi, Genesis, and Voyager Digital collectively paid a combined amount of approximately $502 million in attorneys’ fees-nearly as much as FTX.
Yet, FTX’s case is still less expensive than Lehman Brothers’ bankruptcy case, which cost nearly $6 billion in attorneys’ fees, and Puerto Rico’s debt restructuring, which cost over $2 billion. Even with the huge expense, the vast majority of FTX clients will recover 118% of their claims, an uncommon result in corporate insolvencies when creditors recover only a tiny dividend on what they are owed.
High Lawyer Fees Show Crypto’s Disadvantages
The case points to underlying problems in the crypto market, where a lack of financial regulation has generated expensive court battles. Rising Chapter 11 fees in recent years have consumed a large portion of debtors funds, testing the extent to which legal proceedings serve the creditors or merely add to legal costs. If crypto companies are not properly regulated, subsequent bankruptcies can follow the same route, with high legal costs leaving creditors with less cash.
Also read : Sam Bankman-Fried Speaks About Crypto and Life in Prison
