The recent bankruptcy announcement from crypto exchange FTX has raised eyebrows, with legal fees already topping $200 million in just seven months. This circumstance has garnered the attention of an independent auditor, Katherine Stadler, who filed a 47-page report on the fees charged by law firms in the first months following FTX’s bankruptcy.
While Stadler initially acknowledged that the fees were not “wholly unreasonable” given the complexities surrounding the case, she went on to confirm that the fees do indeed appear on track to be very expensive. FTX operates within a “largely unregulated financial system” and is marked by its “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.” These factors play a substantial role in justifying the mounting expenses.
So far, the team working on FTX’s bankruptcy has requested over $200 million in fees. Stadler was particularly impressed with the restructuring team, stating that she was “struck” by the professionals who managed to accomplish what few others could in a matter of 90 days.
However, it is crucial to consider the potential negative consequences of such high fees. Creditors may bear the brunt of the costs, possibly leading to less favorable outcomes for those involved. This could result in a more costly and complex Chapter 11 process. Stadler advises that “careful stewardship of administrative expenses” and a “cost-conscious and cost-effective” approach will ultimately lead to better results.
The circumstances surrounding FTX’s bankruptcy serve as an important reminder when considering the pros and cons of operating within the largely unregulated world of cryptocurrency exchanges. While providing immense freedom and flexibility, the lack of regulation can also result in dire consequences. This case demonstrates the necessity for exchanges to implement robust corporate governance structures, even in the absence of regulatory oversight.
In conclusion, FTX’s bankruptcy may be shaping up to become a very expensive affair, but there is some justification for the significant legal fees incurred thus far. The complexity of the case, the fact that FTX operates within an unregulated financial system, and the lack of corporate governance have all contributed to the heightened fees. However, it is essential to carefully weigh the potential costs and benefits of working within such an environment, as the potential risks and expenses become increasingly evident.
Source: Cointelegraph
