FTX Bankruptcy: Former SEC Official Points Out Potential Legal Team Profit; FTX Aims to Sell $175M Claim
Summary:
Former SEC official, John Reed Stark, suggests FTX's restructuring plan amid bankruptcy could be beneficial for its legal team. Despite ongoing efforts, FTX has no plans to relaunch within the current Chapter 11 framework. The lawyers and restructuring team, who charged over $200 million from November 2022 to June 2023, are expected to profit substantially. Bankrupt crypto exchange FTX has also applied to a Delaware court to sell its $175 million claim against the bankrupt Genesis Global Capital. FTX's collapse in November 2022 did not affect Genesis's market-making activities.
In remarks made by ex-SEC officer, John Reed Stark, the restructuring strategy of FTX is possibly a means for its attorneys to cash in on the bankruptcy procedure. Via a message on social media platform X, Stark stated the legal team of the take-over company should send out a tongue-in-cheek "Thank you" message to all FTX customers, considering the hefty profits they amassed during the bankruptcy process. He humorously added, each lawyer could perhaps buy a waterfront home in 2024.
On January 31, during a court session at the U.S Bankruptcy Court for the District of Delaware, Andy Dietderich, FTX's counsel from the law firm Sullivan and Cromwell, clarified, despite rigorous attempts, they had no intentions of re-launching FTX, referred to as FTX 2.0, under the existing Chapter 11 bankruptcy structure. Stark forecasted the probability of the FTX Chapter 11 restoration strategy was low. He compared restructuring FTX to an attempt at restructuring a hybrid of Murder Inc, The Cali Drug Cartel, and Madoff Investment Advisory Services, implying doubt in the legal team's involvement.
From November 2022 through to June 2023, the legal and restructuring team administering the bankruptcy of the crypto exchange FTX, charged over $200 million, an amount found reasonable by court-approved fee examiner, Katherine Stadler. On June 20, she documented the fees were "not entirely unreasonable currently". Nevertheless, in the quarter ending on October 31, bankrupt FTX was found to have spent nearly $53,000 per hour on legal and advisory fees, based on recent remuneration filings. Papers from December 5 to December 16 showed the bankruptcy team legal fees amounted to not less than $118.1 million from August 1 to October 31, amounting to an average of $1.3 million per day, or $53,300 per hour over the 92 days duration.
On the first day of February, FTX lodged a request in a Delaware court to vend their $175 million claim against bankrupt Genesis Global Capital. Alameda Research, the affiliated hedge fund, holds the claim and FTX can sell the claim wholly or partially, scheduling the sales at optimal times if approved.
FTX went under in November 2022 following the detection of abnormalities in its account records. At that time, Genesis had $175 million locked in its FTX account, although the company commented the situation did not influence its market-making operations.
Published At
2/4/2024 11:16:17 AM
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