• FTX crypto exchange has collapsed, with founder Sam Bankman-Fried in FBI custody and as many as 1 million creditors waiting to get their money back.
• Law firms and consultants are set to gain from the collapse, having been hired to untangle the mess.
• Fees for legal and advisory services, such as those of Sullivan & Cromwell and Alvarez and Marsel, are as high as $2,165 and $1,375 an hour, respectively, and former CEO John J. Ray III will receive a $3 million bonus upon completion of the Chapter 11 bankruptcy plan.
The recent collapse of the FTX crypto exchange has left many people aggrieved, with founder Sam Bankman-Fried in FBI custody, his senior lieutenants cutting deals with prosecutors, and as many as 1 million creditors still waiting to get their money back. However, one group is set to benefit from the mess – the many law firms and consultants that have been hired to untangle it.
Court filings issued Wednesday detail the fees charged by lawyers, tax advisers, restructuring specialists and the company’s own new senior management, including John J. Ray III, who took over from Bankman-Fried as chief executive officer on Nov. 11. To that list of lawyers can now be added Paul Hastings, hired to be counsel for a representative committee of nine FTX creditors.
Sullivan & Cromwell (S&C), FTX’s New York-based law firm, charges a hefty hourly rate of as much as $2,165 for work by partners and special counsel. They received some $3.4 million from FTX in the three months prior to its collapse, most of which was paid on Nov. 3. West Realm Shires, the subsidiary of FTX that owned the U.S. business, also paid a $12 million retainer at S&C before West Realm filed for bankruptcy on Nov. 14, according to the filings.
Meanwhile, staff at financial advisers Alvarez and Marsel charge an hourly rate of as much as $1,375 and received $4 million in retainers prior to the bankruptcy. John J. Ray III, via his company Owl Hill, also charges a similar hourly rate. Upon completion of the Chapter 11 bankruptcy plan he will get a further $3 million bonus. Fellow law firm Landis Rath and Cobb, which was appointed as the plan administrator, will receive a fee of $1.5 million for its services.
These fees are likely to add up to a significant sum, since the FTX bankruptcy is set to be a complex and lengthy process. In addition to the creditors waiting for their money back, there are two class actions launched against the company, and the Securities and Exchange Commission has launched its own investigation.
The FTX collapse has left many people out of pocket, but it has also provided a lucrative opportunity for the many law firms and consultants that have been hired to untangle the mess.