Court Give Sullivan & Cromwell $31M For FTX Work

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Court Give Sullivan & Cromwell $31M For FTX Work
Sullivan Cromwell law firm in New York City, U.S., July 27, 2022. REUTERS/David Dee Delgado

In a significant development in the legal battle surrounding FTX Trading Ltd.’s bankruptcy case, a Delaware bankruptcy judge has greenlit a payment of approximately $31 million in fees to Sullivan & Cromwell LLP for its services rendered from August through October 2023.

Fee Examiner’s Recommendation

The decision follows a recommendation put forth by Katherine Stadler, the Chapter 11 fee examiner, in a report filed on Tuesday. Stadler advocated for the payment to Sullivan & Cromwell, albeit slightly lower than the initial request of about $32 million. She cited the firm’s involvement in addressing complex issues pertaining to FTX’s bankruptcy proceedings but raised concerns about certain aspects of their work.

Court Give Sullivan & Cromwell $31M For FTX Work : Areas of Concern

While acknowledging Sullivan & Cromwell’s pivotal role in advising FTX on multifaceted matters, Stadler pointed out potential areas of inefficiency. She highlighted instances such as the firm’s purported time spent on extraneous activities, including reading a book about FTX founder Sam Bankman-Fried. Stadler’s report also flagged concerns about potential overstaffing and excessive attendance at certain proceedings.

FTX’s Bankruptcy Saga

FTX sought Chapter 11 bankruptcy protection in November 2022 following the collapse of its FTT digital token and a subsequent surge in customer withdrawals. The company’s liabilities amounted to approximately $8.7 billion, with a significant portion attributed to misappropriated fiat currency and stablecoin.

Court Give Sullivan & Cromwell $31M For FTX Work : Sullivan & Cromwell’s Role

During the critical period between August and October 2023, Sullivan & Cromwell provided counsel to FTX on various fronts, including tax compliance, regulatory matters, customer claims investigation, and asset recovery endeavors. The firm’s efforts were instrumental in navigating the complexities of the bankruptcy process.

Scrutiny on Bankruptcy Fees

The approval of Sullivan & Cromwell’s fee request underscores the heightened scrutiny surrounding legal expenses in cryptocurrency-related bankruptcies. Notable cases like Celsius Network LLC and Cyxtera Technologies Inc. have also witnessed substantial fee requests, raising questions about the appropriateness of such expenses.

Examiner’s Recommendations

While the bulk of Sullivan & Cromwell’s fee request was approved, Stadler recommended adjustments to address identified concerns, resulting in a reduction of over $806,000 in fees and minor adjustments to expense claims. She underscored the importance of transparency and efficiency in justifying legal expenditures.

Court Give Sullivan & Cromwell $31M For FTX Work : Ongoing Proceedings

As the legal proceedings unfold, stakeholders continue to navigate the complexities of FTX’s bankruptcy case. The recommendations provided by Stadler offer insights into areas warranting further scrutiny and potential avenues for resolution.