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FTX proposes controversial reorganization plans

Posted:Dec 18, 2023 13:01 Category: Americas , Blockchain , Crypto , Posted by Lea Hogg

FTX finds itself entangled in discussions on the best resolution for the bankruptcy case of a fraud-tainted cryptocurrency firm.

FTX’s Complex Bankruptcy Saga

The proposed pay-out plan involves the distribution of billions in cash, subject to the liquidation of the majority of the company’s cryptocurrencies. Despite claims of fairness and cost-effectiveness, questions loom over the re-launch of the defunct crypto exchange, the valuation of digital tokens, and the anticipated returns for creditors.

The plan’s journey to approval involves votes from specific creditor classes and, if successful, will reach the desk of U.S. Bankruptcy Judge John Dorsey in 2024. Some creditors argue that the plan contradicts FTX’s Terms of Service, asserting users’ ownership rights over digital assets.

FTT token’s soaring fall

In early November 2022, the FTT token’s valuation stood at an impressive US$ 26. Fast forward, and it is currently trading at a mere US$ 3.70, prompting scrutiny and concern within the cryptocurrency community.

Advisory costs soar to $118 Million in three months

In the three months leading up to October 31, FTX has been incurring staggering hourly losses of US$ 53,000, according to the latest compensation filings related to its bankruptcy proceedings.

Legal fees pile up

Recent court filings from December 5 to December 16 reveal that FTX has been grappling with substantial bankruptcy fees, with legal and advisory expenses totalling a staggering $118.1 million between August 1 and October 31. This translates to an alarming daily expenditure of $1.3 million and an hourly burn rate of $53,300 over the 92-day period.

Alvarez and Marshall lead with $35.8 million charged to FTX estate

The lion’s share of these expenses came from management consulting firm Alvarez and Marshall, billing FTX a colossal $35.8 million for their services during the three-month period. Following closely behind, global law firm Sullivan & Cromwell charged $31.8 million, with an average hourly rate of $1,230.

Fee examiner flags concerns

A report filed on December 5 by court-appointed fee examiner Katherine Stadler raised significant concerns about the billings submitted by larger advisory firms, including Sullivan & Cromwell and Alvarez & Marshall. The report highlighted issues such as apparently top-heavy staffing, excessive meeting attendance, fees related to non-working travel time, and various technical and procedural deficiencies with respect to time entries.

 

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