Former SEC official John Reed Stark has proposed that the FTX restructuring plan may serve as a means for the legal team to capitalize on the bankruptcy proceedings.
On a social media platform X, Stark humorously suggested that all FTX clients should expect a facetious “Thank You” note from the now-defunct exchange’s legal team, given the considerable profits garnered throughout the bankruptcy process. Stark also jokingly remarked that each legal team member might be able to acquire a new beach house in 2024.
Furthermore, It was openly discussed on Jan 31 at the U.S. Bankruptcy Court in Delaware. FTX’s lawyer, Andy Dietderich, clarified something. Despite working hard, there were no plans to restart FTX, dubbed as FTX 2.0. This would all be happening amid Chapter 11 bankruptcy.
However, Stark anticipated that the Chapter 11 FTX reorganization plan would face challenges in achieving success. He drew a vivid analogy, comparing the task of restructuring FTX to attempting to reorganize a blend of “Murder Incorporated, The Cali Drug Cartel, and Madoff Investment Advisory Services.”
From Nove 2022 to June 2023, attorneys and the restructuring team overseeing the bankruptcy of the crypto exchange FTX accumulated fees exceeding $200 million. The court-appointed fee examiner, Katherine Stadler, deemed these fees reasonable, stating in a report filed on Jun 20, 2023, that they were “not wholly unreasonable at the moment.”
FTX Seeks Approval For Genesis Claim Sale
Nevertheless, in the quarter concluding on Oct 31, 2023, FTX allocated approximately $53,000 per hour towards legal and advisory fees, as indicated by recent compensation filings. Records spanning from Dec 5 to Dec 16, 2023, unveiled that the legal team handling the bankruptcy billed a minimum of $118.1 million from Aug 1 to Oct 31, 2023. This averaged $1.3 million daily or $53,300 per hour over 92 days.
On Feb 1, FTX filed a petition in a Delaware court seeking approval to sell its $175 million claim against the bankrupt Genesis Global Capital. Alameda Research, the corresponding hedge fund, owns this claim. Should the request be approved, FTX’s would have the authority to sell the claim in its entirety or portions, strategically timing the sales for optimal conditions.
In Nov 2022, FTX faced a collapse following the discovery of irregularities in its accounts. During this period, Genesis had $175 million associated with its FTX’s account, asserting that this did not adversely affect its market-making activities.
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