Legal Advisors at Sullivan and Cromwell Bill FTX Exchange $38 Million In 3 Months

FTX, the once-prominent cryptocurrency exchange that filed for bankruptcy in November 2022, has paid a hefty sum to legal and consulting firms assisting it through the process.

Documents released by FTX consultants on June 15 show fees and expenses from February 1 to April 30 were $121.8 million, according to data collated by The Block Research.

FTX Legals Costs Skyrocketing

Sullivan and Cromwell‘s FTX lawyers billed the bankrupt exchange for $37.6 million over the period, representing 30.9% of all fees and expenses. Investment banking firm Jefferies charged the lowest amount, accounting for 0.6% of the total.

Restructuring consultants at Alvarez and Marsel set the bankrupt exchange back $37 million with over $1.1 million in expenses that included $51,225 in meals, $149,155 in lodging, and other miscellaneous items amounting to $1,995.

“As restructuring advisors, their claims and compensation sit on top of other claims and are ‘super senior’ to the unsecured claims bucket which includes customer deposits,” The Block Research’s Greg Lim said.

From November 12 and November 30, the law firm indebted more than $9.5 million in compensation for over 6,500 chargeable hours. Almost half of those chargeable hours, totaling more than $4.8 million, were billed by partners, who typically charge the highest hourly rate.

The firms will initially only be paid a little over $15.5 million, or 80% of the value of their work, under a court-ordered interim compensation plan.

FTX Leadership Mulls Relaunching Exchange Platform

According to the filing, the American multinational law firm assigned more than two dozen partners to the FTX case. Jim Bromley, a partner at the firm and the lead attorney, charged over 178 hours for the weeks between November 12 and November 30.

Rising costs affiliated with the FTX bankruptcy are spurring some former clients to reboot the exchange under new management to return value to clients. One option discussed is for the bankrupt company’s creditors to convert part of their holdings into shares in a reopened exchange.

FTX’s lead attorney said that if they were to use that route, the plan would need to raise significant capital and said there had been internal debate over whether that funding should come from the company’s real estate or third-party capital.

Travis Kling, Chief Investment Officer of Ikigai Asset Management, once called the reboot “one of the most optimistic outcomes possible for lenders.” Ikigai holds most of its holdings on FTX.

Untangling FTX Complex Web

The legal filings offer a glance into the vicious grind of advisors to untangle FTX’s complex web of accounts and haphazard accounting standards. In November, Sullivan and Cromwell’s lawyers spent over 1,900 hours analyzing and recovering FTX’s global asset base.

Lawyers for Sullivan and Cromwell did $40,000 worth of work to appear in FTXs first bankruptcy hearing on November 22 based on court filings for hours charged and hourly rates.

In a turnaround of events, FTX remitted money to its customers thanks to an explosion of AI. According to financial data reviewed by the Financial Times for 2022, FTX already owns a stake in AI startup Anthropic worth $500 million.

While it’s ambiguous if that specific number is accurate or the Anthropic market share it constitutes, the reality is that the business was valued at $4.6 billion, and it may soar due to the hysteria that abounded the industry after the boom started with the launch of ChatGPT-3.5 in the fall of 2022, according to Coincu News.

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