FTX's Daily Legal Expenses: A $1.5 Million Burn Rate
Creditors are expressing concern over the swift depletion of funds during the extended duration of FTX's bankruptcy proceedings.
The dissolution of FTX is incurring costs of up to $1.5 million per day as legal professionals and other experts delve into the remnants of the global exchange. The escalating expenses became a focal point of contention during a bankruptcy hearing held on Wednesday, where the creditors' committee expressed dissatisfaction with the current rate of expenditure.
Kris Hansen, a lawyer from Paul Hastings representing the creditors' committee, highlighted the situation, stating, "They've now escalated to an expenditure pace of nearly $50 million monthly in fees, involving hundreds of lawyers, financial advisors, and bankers working on this practically full time. Each dollar spent on the case effectively diminishes the amount that creditors will ultimately receive."
A report submitted two months ago by a fee examiner affiliated with another law firm, which reviewed charges over the initial seven months of the case amounting to $200 million, acknowledged the fees as "noteworthy." The report also commended the professionals who are sifting through the complex bankruptcy to recover creditors' funds from the "smoldering heap of wreckage."
The intricacies of the bankruptcy are further compounded by concurrent negotiations with other collapsed crypto giants, such as the recent agreement with Genesis. FTX's Alameda Research has the potential to claim $175 million from Genesis' bankruptcy. Adding to the complexity, the financial records of FTX have been fraught with problems since the outset. FTX's CEO, John J. Ray III, responsible for overseeing the winding down process, has admitted that the records were tainted with falsehoods and obscurity by the prior FTX management.
Representatives of the insolvent exchange emphasize their tireless efforts to manage the situation and assert that the proceedings are progressing as planned.
However, Hansen, who has argued that the process to potentially relaunch an FTX 2.0 is sluggish and excessively secretive, also pointed out that the debtors' group has not adequately maximized returns from the company's cash and cryptocurrency assets while the case unfolds. He stressed the significance of each passing day in the context of the proceedings, underscoring the urgency to act diligently.