The bankruptcy proceedings for cryptocurrency exchange FTX are accruing substantial fees, soaring to $118 million designated for lawyers and advisors.
In a recent development, U.S. Bankruptcy Judge John Dorsey, presiding over the case in Wilmington, Delaware, granted approval for FTX to reimburse a specific group of non-U.S. creditors. This group, pivotal in negotiating a settlement among various factions of FTX customers, is set to receive over $2 million in legal fees.
The reimbursement, sanctioned for 66 major account holders representing non-U.S. customers with more than $1 billion in cryptocurrency deposits on FTX’s international platform, pertains to settling disputes among customers. The approved sum accounts for expenses incurred between May 1 and Oct. 31. Additionally, FTX committed to disbursing up to $650,000 monthly for the remainder of the bankruptcy proceedings, contingent on further scrutiny and authorization by the court.
Initially, Judge Dorsey expressed reservations about compensating the creditor group, questioning the necessity to remunerate a party involved in negotiations aligned with their self-interest. However, upon FTX’s clarification that the group’s involvement streamlined the resolution process, Dorsey acknowledged the importance of their role in facilitating a comprehensive plan for FTX’s 9 million customers.
FTX disclosed a settlement arrangement aimed at allocating a minimum of 90% of recovered assets toward repaying customers. This pact also outlines the distribution of assets between FTX’s U.S. and international clienteles, acknowledging that neither group will receive full reimbursement. FTX intends to submit a formal bankruptcy plan, slated for the following month, encapsulating the settlement details and offering an estimation of customers’ anticipated returns from the bankruptcy proceedings.
The international customer base of FTX bore the brunt of the financial deficit that led to the exchange’s collapse. With $8.9 billion reportedly missing from the international arm and $166 million absent from the U.S. branch, FTX grappled with substantial losses.
FTX initiated bankruptcy proceedings in November 2022 amidst allegations of misappropriating and losing billions in customers’ crypto deposits. To date, FTX has recuperated over $7 billion in assets for customer reimbursement and continues pursuit through legal actions against FTX insiders and beneficiaries of pre-bankruptcy transactions.
The founder of FTX, Sam Bankman-Fried, faced conviction on November 3 on charges of siphoning off billions from customer accounts.
Legal representation for the non-U.S. creditor group comprises Eversheds Sutherland and Morris, Nichols, Arsht & Tunnell. The actual fees disbursed to these firms will hinge on the services rendered, subject to evaluation by a court-appointed fee examiner, open to potential challenges, as detailed in FTX’s court submissions.
