FTX Crypto Exchange Liquidation Costs Soar

A court-appointed examiner stated in a filing made on Tuesday that the liquidation of crypto exchange FTX will be “extremely costly by any standard,” with professional fees already exceeding $200 million.

By the end of January, lawyers and other professionals had already tallied up nearly 35,000 billable hours, the equivalent of four solid person-years of work, according to Katherine Stadler, a bankruptcy attorney appointed in March to review fees.

“These proceedings appear to be extremely costly by any standard,” said Stadler, citing costs that already amount to 2% of estate assets and 10% of reported cash, with 46 of the 242 attorneys assigned to the case billing more than $2,000 per hour.

“What makes these cases extraordinary… is the largely unregulated financial system in which the Debtors (and other similar financial technology companies) operate,” she said, citing the “lack of even the most basic corporate governance” at Sam Bankman-Fried’s exchange.

This description echoes the criticism leveled by new CEO John J. Ray III.

“Very few firms could have accomplished what these professionals did in 90 days—transforming a smoldering pile of debris into a functioning Chapter 11 debtor-in-possession,” said Stadler, describing the period immediately following the bankruptcy filing as “an ‘all hands on deck’ emergency.”

She asked lead counsel Sullivan & Cromwell to reduce its $42 million cost by approximately $650,000 due to deficiencies such as overstaffing, excessive meetings, and unclear documentation.

Since the collapse of the exchange in November, Ray has been attempting to resolve its affairs, and some of his filings suggest an effort to relaunch operations as FTX 2.0.

The U.S. government’s request for a broader independent investigation into FTX’s demise has been referred to the Court of Appeals.