- FTX has paid nearly $1B in fees, making it the costliest crypto collapse in history.
- Lawyers have found billions in lost assets, but fees continue to drain creditor payouts.
- Court rulings demand $12.7B in customer refunds as bankruptcy costs keep growing.
FTX’s bankruptcy has become the most expensive crypto-related collapse, with legal and advisory fees reaching $948 million as of early 2024. The case has accumulated some of the highest restructuring costs in U.S. history, trailing only Lehman Brothers’ $6 billion bankruptcy cost in 2008. Despite its scale, creditors are set to recover 118% of their funds, an unusual outcome in Chapter 11 proceedings.
Legal and Advisory Costs Continue to Rise
The firm’s consulting expenses have risen immensely, and that makes it one of the most complicated finance cases. Sullivan & Cromwell, the lead law firm, has billed nearly $300M. Alvarez & Marsal, the restructuring firm, has charged $400 million. John Ray’s consulting firm, overseeing the process, has received around $10M. These fees highlight the efforts required to unwind financial entanglements.
When compared to other insolvent crypto firms, FTX’s fees alone surpass the combined costs of Celsius, Genesis, BlockFi, and Voyager. Celsius and advisory fees could be estimated at $229 million, Genesis at $131.9 million, BlockFi at $81.1M, and Voyager at $60.1 million. The FTX firm’s total is nearly double the combined costs of these four companies, emphasizing the complexity of its legal proceedings.
Source: Bloomberg
Creditors and Lawsuits Add Complexity to Proceedings
Legal experts suggest creditors are benefiting from the substantial legal and financial efforts to recover assets. Attorneys and advisors have located billions of dollars across a vast network of accounts. Hedge funds that bought FTX customer claims at 10 cents on the dollar after the company’s collapse are among the biggest beneficiaries.
Under the FTX umbrella, attorneys are still combing through multiple legal entities to recover additional assets for creditors. Pending lawsuits, including a case against Binance Holdings Ltd. seeking nearly $1.8 billion, add further complexity. Meanwhile, FTX has initiated its first customer distributions, signaling progress in compensating affected users.
Related: BTC Could Drop to $91K as FTX Repayment Adds Pressure
A New Era of Crypto Bankruptcies?
A U.S. court adjourned a ruling in August 2024 where it ordered FTX to return $12.7 billion to customers and fraud victims, marking the largest financial recovery in Commodity Futures Trading Commission history. The decision shows the severity of FTX’s collapse and the extensive legal efforts required for restitution.
The case also underscores the rising monetization of court cases in the U.S., especially in crypto, where legal fees approach $1 billion. As Chapter 11 cases become increasingly costly, concerns grow over legal expenses consuming creditor recoveries. The current trend of bankruptcy proceedings could stand as the new standard in future events.
