FTX Bankruptcy Expenses Exceeded $200 Million in First 90 Days

The absence of corporate records is reportedly making FTX’s bankruptcy “very expensive by any measure.”

During the first 90 days of the cryptocurrency exchange’s bankruptcy proceedings, the firm was billed for $200 million in fees by hundreds of lawyers, financial and tax advisers, and other professionals — an amount exceeding 2% of its $5 billion in reported assets, the Financial Times (FT) reported Wednesday (June 21), citing a study by a court-appointed fee examiner.

The fees that were billed were not “wholly unreasonable,” the fee examiner, Katherine Stadler, said in the report.

Stadler said that the FTX bankruptcy cases are “extraordinary” due to the “largely unregulated financial system in which the debtors (and other similar financial technology companies) operate, combined with their global scope, the complete absence of corporate records, and the nonexistence of even the most basic corporate governance,” according to the report.

While the process is likely to continue to be “very expensive by any measure,” Stadler suggested only minor modifications and said the administrative expenses will provide a better outcome for the creditors, per the report.

FTX CEO John J. Ray — who was appointed chief executive as part of the bankruptcy proceedings — said after a few days in the role that he had never seen such a complete failure of corporate controls as he saw at FTX.

“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” Ray said in a Nov. 17 filing with the U.S. bankruptcy court.

FTX Group companies FTX.com, FTX US, Alameda Research and about 130 other affiliated companies filed for bankruptcy protection on Nov. 11, after a tumultuous week that included news of a possible liquidity crisis, investigations by U.S. regulators and the swift cancellation of a possible acquisition by rival cryptocurrency exchange Binance.

In April, an interim report by the FTX Debtors took harsh aim at the FTX Group’s profound lack of appropriate documentation and recordkeeping and its willful avoidance of executive oversight.

“Key functions, including those of chief financial officer, chief risk officer, global controller and chief internal auditor, were missing at some or all critical entities,” the report said. “Nor did the FTX Group have any dedicated financial risk, audit or treasury departments.”