The FTX bankruptcy saga has taken an alarming turn as daily legal expenses surge to a staggering $1.5 million, with creditors now sounding the alarm.
Lawyers and other bankruptcy professionals are racking up these costs while dissecting the remains of the major crypto exchange, CoinDesk reported this week, noting that creditors are now voicing concerns over the rapid depletion of funds during the bankruptcy proceedings.
As seen at a bankruptcy hearing on Wednesday, the escalating financial burden has now ignited debates among stakeholders.
The creditors’ committee is expressing frustration at the present pace of expenditure, highlighting that the mounting bills are impacting the potential returns for those owed money.
“They’ve now moved to a pace of almost $50 million a month in fees, with literally hundreds of lawyers, financial advisors and bankers working on them practically full time,” Kris Hansen, a lawyer from Paul Hastings was quoted by CoinDesk as saying.
The lawyer added that “every dollar spent in the case is essentially a dollar that creditors don’t receive.”
While the amount of money spent on the bankruptcy is certainly high, the FTX bankruptcy case is without a doubt extremely complex.
Adding to the complexities is negotiations with other bankrupt crypto firms, including crypto lender Genesis and its parent company, Barry Silbert’s crypto conglomerate Digital Currency Group (DCG).
Additionally, the bankruptcy’s intricacies are exacerbated by discrepancies in FTX’s financial records.
This has been acknowledged by the company’s CEO, John J. Ray III, who on multiple occasions have blamed FTX’s previous management for a lack of record-keeping and obfuscation of losses.
$200 million spent in seven months
The fees associated with the bankruptcy have totaled $200 million within the initial seven months of the bankruptcy case.
In a report filed two months ago, an external examiner described the costs as “remarkable,” while still maintaining that this level of spending has been necessary to sort out the complex bankruptcy.
FTX is aiming to reimburse its creditors in traditional fiat currency rather than Bitcoin (BTC) or Ether (ETH), and Mike Novogratz’s firm Galaxy Digital has recently been hired to help maximize the fiat value of FTX’s crypto holdings.