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In the first quarter of this year, the FTX cryptocurrency exchange made waves with its massive spending of $121.8 million on legal and consulting fees.
This major allocation of resources underscores FTX’s commitment to navigating the complex regulatory landscape and ensuring its operations comply with evolving legal standards in the fast-paced world of digital assets.
FTX Incurs High Fees For Legal and Consulting Firms
During this period, FTX’s legal representatives, Sullivan and Cromwell, submitted a substantial bill of $37.6 million, accounting for 30.9% of all fees and expenses incurred. In contrast, investment banking firm Jefferies charged the lowest amount, making up only 0.6% of the total fees.
JUST IN: FTX spend $121.8M on legal & consulting fees in Q1; Sullivan & Cromwell $37.6M, Alvarez & Marsel $37M.
— Coingraph | News (@CoingraphNews) June 20, 2023
Alvarez and Marsal, the restructuring consultants engaged by the bankrupt exchange, charged $37 million for their services, with additional expenses totaling over $1.1 million. These expenses included $51,225 for meals, $149,155 for lodging, and various miscellaneous items amounting to $1,995.
Greg Lim, an analyst at The Block Research, explained that as restructuring advisors, the claims and compensation of these firms take priority over unsecured claims, including customer deposits, making them ‘super senior’ in the hierarchy.
Between November 12 and November 30, Sullivan and Cromwell accumulated over $9.5 million in compensation for over 6,500 chargeable hours. Partners accounted for over $4.8 million, almost half of the chargeable hours, as they typically bill at the highest hourly rate.
However, as per a court-ordered interim compensation plan, the firms will initially receive a payment of just over $15.5 million, which represents 80% of the value of their work.
Partners Assigned to FTX Bankruptcy Case, Reviving Discussions, and Capital Considerations
Over 24 partners from a major American multinational law firm have been assigned to handle the FTX bankruptcy case. Jim Bromley, the lead attorney, dedicated over 178 hours to the case between November 12 and November 30.
Following these mounting costs associated with the FTX bankruptcy have sparked discussions among former clients, who are exploring possibilities to revive the exchange under new management. Their primary goal is to restore value to clients affected by the bankruptcy.
The executives are considering converting some of the bankrupt company’s holdings into shares in a reopened exchange. A move that could also provide compensation to creditors.
To pursue this approach, the company needs to raise a substantial amount of capital. The company’s executives are considering using real estate assets or seeking third-party funding through internal deliberations.
Travis Kling, the Chief Investment Officer of Ikigai Asset Management, has expressed his optimism about the potential reboot. He considers this as one of the most favorable outcomes for lenders. Given that Ikigai Asset Management holds most of its holdings on the FTX platform, the company is closely monitoring the developments surrounding the bankruptcy proceedings.
FTX’s Customer Remittances Surge as AI Boom Triggers Turnaround
FTX recently remitted money to its customers following a significant surge in the AI market, which resulted in a dramatic shift in the company’s fortunes.
According to financial data reviewed by the Financial Times, FTX already has a stake in an AI startup called Anthropic, which is valued at $500 million.
While the exact accuracy of this valuation and its market share is unclear, it is undeniable that the company’s overall valuation now stands at an impressive $4.6 billion.
Moreover, with the industry experiencing widespread excitement following the launch of ChatGPT-3.5, Anthropic’s value may likely continue to surge.
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