FTX’s Bankruptcy Proves Going Broke Ain’t Cheap

According to a report from Bloomberg, the ongoing bankruptcy case of the collapsed cryptocurrency exchange/pseudo ponzi scheme FTX has racked up nearly $1 billion in lawyer fees—and that figure continues to climb as firms continue to try to unwind Sam Bankman-Fried’s mess and make creditors whole.

Per Bloomberg, $948 million has already been paid to more than a dozen law firms involved in the FTX bankruptcy case—and $952 million in fees have been approved by the court thus far. That figure makes FTX one of the most expensive Chapter 11 bankruptcies in history. It trails only the bankruptcy of Lehman Brothers, the investment bank at the heart of the subprime mortgage crisis that resulted in a global financial catastrophe, which cost $6 billion, and Nortel Networks, a telecommunications company that went under in 2009 and did significant damage to the Canadian economy, which cost more than $2 billion.

While the costs keep climbing in the FTX case, creditors waiting to get their money back might not mind too much. Prior reporting indicates that FTX expects to have about $16.3 billion left once it is done selling off its assets. About $11 billion is owed to customers and creditors, meaning there should be more than enough to make them whole. FTX customers are expected to get back 118% of what they had in their accounts (though government regulators are likely going to get stiffed, along with company shareholders). Who says crypto is a bad investment? Look at those returns!

FTX’s bankruptcy has proven to be costly in large part because the company was an absolute mess. Despite holding $32 billion in value at is peak, Bankman-Fried and the company used Google Docs, Slack, and Excel spreadsheets to manage assets and liabilities, per court filings. The company had a QuickBooks membership for accounting, which is designed for small businesses and not an international currency exchange, and it had 80,000 transactions unprocessed in its account, stored in a folder titled “Ask My Accountant.” John Ray III, an insolvency expert who was tasked with overseeing the bankruptcy, said he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information”—and that guy liquidated Enron.

Given all that, it’s a minor miracle that not only are these (extremely well-paid) lawyers able to parse all of FTX’s books but will also end up actually being able to make customers whole despite the growing cost of bankruptcy. While the lawyers keep busy with all that, Bankman-Fried apparently found his way back to his Twitter account the other day to offer his thoughts on inefficiencies at large organizations. How much do you think they’d have to pay Sam from the settlement to guarantee he’d never tweet again?