A canceled FTX reset poses a threat to the legal team’s profits
Former US Securities and Exchange Commission (SEC) official John Reed Stark suggested that FTX's restructuring plan could be a way for the legal team to profit from bankruptcy proceedings.
In a post on social media platform X, Stark said all FTX customers should receive a sarcastic “thank you” note from the defunct exchange's legal team in light of the huge profits they made in bankruptcy proceedings. Stark also quipped that every member of the legal team might be able to buy a new beach house by 2024.
In a January 31 hearing in the United States Bankruptcy Court for the District of Delaware, FTX attorney Andy Dietrich of Sullivan & Cromwell explained that despite several efforts, FTX – known as FTX 2.0 – had no plans to restart in Chapter 11 bankruptcy. Framework.
FTX Goes Chapter 7 – And FTX's Bankruptcy Lawyers Are Heading Offshore, Probably In 2024
FTX bankruptcy team attorneys should send thank you notes to all FTX clients. why? Because thanks to FTX clients, every member of the FTX Legal Insolvency Team probably… pic.twitter.com/P89w5tS54y
— John Reed Stark (@JohnReedStark) February 3, 2024
Stark said he foresees that the Chapter 11 FTX reorganization plan will not succeed. He likened restructuring FTX to trying to reorganize the combination of “Murder Incorporated, The Cali Drug Cartel and Madoff Investment Advisory Services.”
Between November 2022 and June 2023, lawyers and a restructuring team paid more than $200 million to bankrupt crypto exchange FTX. Report submitted June 20, 2023.
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However, in the quarter ending Oct. 31, 2023, FTX spent about $53,000 an hour on legal and consulting fees, according to recent compensation filings. Filings from Dec. 5 to Dec. 16, 2023, show the bankruptcy legal team billed at least $118.1 million from Aug. 1 to Oct. 31, 2023, an average of $1.3 million per day, or $53,300 per hour, over 92 days.
In the year On February 1, FTX filed a motion in Delaware court to sell its $175 million claim against bankrupt Genesis Global Capital. An affiliated hedge fund, Alameda Research, owns the claim. If granted, FTX may sell the claim in whole or in part, timing the sale for favorable conditions.
FTX crashed in November 2022 after irregularities were discovered in its accounts. Genesis said it had $175 million tied up in its FTX account at the time, which did not affect its market production activity.
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