For 51 Days of Work, FTX Bankruptcy Fees were Near $20 Million

A bankruptcy court filing by FTX detailed the number of fees billed by its top bankruptcy, legal, and financial advisors for work done in 2022, which exceeded $19.6 million, according to court documents filed on Tuesday. The majority of that amount relates to work done during the period of bankruptcy protection that Sam Bankman-Fried's crypto empire entered in November 2022.

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As part of a court-ordered interim compensation plan, the firms are initially going to receive just over $15.5 million, which is about 80% of the value of their work, as compensation for their work.

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It has been reported that Sullivan & Cromwell, Landis Rath & Cobb, and Quinn Emanuel Urquhart & Sullivan are the law firms that billed FTX for their services. The company's financial advisor AlixPartners and professional advisor Alvarez & Marsal also billed the company for their services.

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Some FTX-billing activities were executed by these firms, which included meetings with other companies that also billed FTX for their time, or corresponding with former and current executives, such as Caroline Ellison, who was the former head of Bankman-Fried's hedge fund, Alameda Research, at the time. As FTX's primary legal firms, Landis Rath & Cobb and Sullivan & Cromwell billed the company a combined total of $10.7 million for more than 8,400 hours of work, Landis Rath & Cobb and Sullivan & Cromwell. In the period between Nov. 11 and Nov. 30, Landis Rath & Cobb billed $1.16 million for the work it performed.

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Sullivan & Cromwell, a target for both lawmakers and Bankman-Fried over their pre-petition work with FTX, sought over $9.5 million in compensation for over 6,500 billable hours, in the period between Nov. 12 and Nov. 30. Over a third of those billable hours, totaling over $4.8 million, were for the work of partners, who typically charge the highest hourly rate.

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According to the filings, Sullivan & Cromwell assigned over two dozen partners to FTX's case, and Jim Bromley, a partner at the firm who was the lead on the case, billed 178 hours for the week between Nov. 12 and Nov. 30, according to the filings.

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In the legal filings, the advisors were able to witness the ferocious effort they put into figuring out how FTX's complex accounting system worked and its accounting practices were slipshod. According to the filings of Sullivan & Cromwell, the firm spent over 1,900 hours in November alone analyzing and recovering FTX's global assets.

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The firm Alvarez & Marsal was billed $1.9 million for over 2,300 hours of work on “business operations,” including meeting with lawyers and FTX executives, analyzing FTX’s holdings using blockchain explorers, and reviewing “cybersecurity scenarios.” Those operations included multiple hours in November corresponding with and calling Ellison, 5.3 hours imaging iPad files and other electronic devices in one single day, and a conference call for the first-day hearing that lasted 2.5 hours.

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It is believed that Quinn Emanuel, which billed more than $1.5 million for work done between November and December on the case, assigned over a dozen lawyers to the case, with nine of them being partners. During November, one of those partners, Sascha Rand, billed over $13,000 for one day's work he did in corresponding with and reviewing first-day issues on behalf of the firm. A Quinn lawyer has applied for over $17,000 on behalf of a “non-working travel” day trip that began on Nov. 21 and ended on Nov. 22.

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During November and December, AlixPartners, a financial consulting firm, billed $1.1 million for work done throughout a little more than a month, spanning from Nov. 28 to Dec. 31.

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There is still a long way to go for FTX's advisors to receive their full compensation. If no objection is filed to the interim compensation order, professional advisors are entitled to 80% of their filed fees. As FTX's bankruptcy saga comes to an end, a final fee application will be filed to receive full compensation for legal and advisory fees.

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Although advisors may not be able to get their due, that doesn't mean they won't be compensated. Based on a study conducted by the Federal Reserve in 2019, it was estimated that Lehman Brothers' bankruptcy fees totaled over $2.56 billion. Sullivan & Cromwell's lawyers, according to court filings of hours billed and hourly rates, did $40,000 worth of work just to appear in FTX's first bankruptcy hearing on November 22, based on the number of hours billed and the hourly rates for the lawyers.