FTX Reorganization Plans: A Means to Get Richer?
Former SEC Official John Reed Stark believes that the FTX reorganization plan might be a way for the legal team handling the bankruptcy process to enrich themselves. Stark sarcastically suggests that every FTX customer should receive a “Thank You” note from the legal team, considering the exorbitant profit they made during the bankruptcy proceedings. He even jokes that each team member could buy a new beach house in 2024.
Stark had previously predicted that reorganizing FTX would be nearly impossible, comparing it to trying to reorganize criminal enterprises. Therefore, he questions the necessity of investing in such an expensive legal team.
Outrageous Fees and Enormous Profits
The individuals and institutions involved in the FTX bankruptcy process charged fees as high as $1800 per hour, with some demanding up to $2375 per hour. With these outrageous fees, they potentially earned a cumulative total of $1.5 million in fees per day.
From the start of the bankruptcy process until November 2023, these experts generated around $250 million from FTX. In just three months (August-October 2023), FTX received an invoice of $118.1 million from its legal representative.
Exorbitant Fees Impacting Repayment Plans
Billionaire Mark Cuban also believes that the legal team knew the proposed FTX reorganization plan was unlikely to succeed but continued to promote it as a possibility for the regulated return of the exchange.
The reality has now set in, and FTX is considering abandoning its plan to restart the company.
The legal fees incurred during the bankruptcy proceedings exceed the repayment amount intended for creditors under the reorganization plan. FTX still aims to repay its creditors in full, but the feasibility of this goal is uncertain given the exorbitant legal fees.
Notably, FTX’s legal representatives in the bankruptcy proceedings include Alvarez and Marshall, Sullivan & Cromwell LLP, Alixpartners LLP, and Quinn Emanuel Urquhart & Sullivan.
Hot Take: The Legal Team’s Lucrative Game
Former SEC Official John Reed Stark raises suspicions about the FTX reorganization plan, suggesting that it may have been a means for the legal team to enrich themselves. With exorbitant fees charged and enormous profits made during the bankruptcy proceedings, Stark sarcastically suggests that each member of the team could buy a new beach house in 2024. This raises questions about the necessity and cost-effectiveness of investing in such an expensive legal team. The impact of these outrageous fees on FTX’s repayment plans remains uncertain, casting doubt on the feasibility of repaying creditors in full.
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