FTX Reorganization Plan is a “Highway Robbery” – Ex-SEC Official

Former SEC Official John Reed Stark has reasons to think that the FTX reorganization plan might be a means to get richer for the legal team behind the bankruptcy process.

FTX Reorganization Plans Unnecessary

According to the ex-SEC veteran, every FTX customer deserves a “Thank You” note from members of the defunct exchange’s legal bankruptcy team. His sarcastic statement was a result of the exorbitant profit made off of FTX during its bankruptcy proceedings. Much more, Stark stated that each member of the team can now probably afford to buy a new beach house in 2024. 

For context, Stark claimed that he had earlier predicted that the Chapter 11 FTX reorganization plan was never going to happen. He compared reorganizing FTX to attempting to “reorganize a cross between Murder Incorporated, The Cali Drug Cartel and Madoff Investment Advisory Services.” To this end, he probably did not think investing in the legal team was necessary.

FTX Goes Chapter 7 — and FTX Bankruptcy Lawyers Are Probably Heading to the Beach in 2024

The FTX bankruptcy team’s lawyers should send thank you notes to all FTX customers. Why? Because thanks to the FTX customers, each member of the FTX legal bankruptcy team can now probably… pic.twitter.com/P89w5tS54y

— John Reed Stark (@JohnReedStark) February 3, 2024

Some of the individuals and institutions involved in the FTX bankruptcy process are charged as high as $1800 per hour. While some even ask for as much as $2375 per hour. With this kind of outrageous fees, they could have earned up to a cumulative of $1.5 million in fees per day. 

Since the bankruptcy process started earlier in 2023 till around November 2023, these experts have generated as much as $250 million from FTX. Between August and October 2023, FTX received an invoice of $118.1 million from its legal representative for its bankruptcy.

Exorbitant Fees Could Hinder FTX Repayment Plans

The pro-crypto billionaire  Mark Cuban also believes that the team was very much aware that the proposed FTX reorganization plan did not stand a chance. Still, he claimed that they kept pushing the narrative that the beleaguered exchange could victoriously return and become a regulated financial institution. 

The reality has finally dawned on the entire community as the exchange is looking at abandoning its plan to restart the company.

Ultimately, it has been discovered that legal fees incurred during the bankruptcy proceedings cost more than the repayment that is supposed to be made to creditors as part of the FTX reorganization plan. The exchange still plans to repay creditors in full but it’s not yet certain how feasible this will be especially with the exorbitant legal fees incurred thus far.

Noteworthy, some of FTX’s legal representatives in its bankruptcy proceedings are Alvarez and Marshall and Sullivan & Cromwell LLP. Alixpartners LLP and Quinn Emanuel Urquhart & Sullivan also provided specialized service to FTX.