FTX loses $53K every hour on ‘bankruptcy fees’ — latest filings show
Crypto exchange FTX has been burning through approximately $53,000 every hour over the three months ending Oct. 31 — just on bankruptcy lawyers and advisers, the latest round of compensation filings show.
Court filings from Dec. 5 to Dec. 16 have shown that the bankruptcy lawyers have charged an accumulated total of at least $118.1 million between Aug. 1 and Oct. 31. Over the 92 days, this equates to $1.3 million per day or $53,300 per hour.
The largest bill came from the management consulting firm Alvarez and Marshall, which charged $35.8 million for its services for the three months.
Coming in second place was global law firm Sullivan and Cromwell, which charged $31.8 million for its services. The hourly rate for Sullivan’s and Cromwell’s services averaged $1,230 per hour.
Global consulting firm AlixPartners charged $13.3 million in the period for professional services relating to forensic investigations. Quinn Emanuel Urquhart & Sullivan charged $10.4 million in the same period, while several other billings from smaller advisory firms added up to over $26.8 million.
Figures shared by a pseudonymous FTX creditor in a Dec. 17 post to X (formerly Twitter) suggest the total legal fees that have been fully paid since the FTX bankruptcy case began is approximately $350 million.
BTW @lopp this estimates $1.45B of remaining professional fees for a total of $1.8B. The Estate is currently charging $0.5B per year and bankruptcies are not short endeavors.
To date, here are the fees that have been petitioned in just under 1 year (~$350mm has been paid): https://t.co/fZhMyTE3B1 pic.twitter.com/5p6at5ZbWy
— Mr. Purple ️ (@MrPurple_DJ) December 17, 2023
Related: FTX debtors assess value of crypto claims based on petition date market prices
Meanwhile, an earlier report filed on Dec. 5 by the court-appointed fee examiner, Katherine Stadler, identified “significant areas of concern” with the billings submitted by the larger advisory firms, including Sullivan and Cromwell, Alvarez and Marshall, and others between May 1 and June 31.
“The Fee Examiner identified apparently top-heavy staffing, apparently excessive meeting attendance, fees related to non-working travel time, and various technical and procedural deficiencies with respect to some time entries (including vague and lumped entries),” wrote the report regarding the billings submitted by Alvarez and Marshall.
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United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce said many non-fungible tokens (NFTs), including those with mechanisms to pay creator royalties, likely fall outside the purview of federal securities laws.
In a recent speech, Peirce said NFTs that allow artists to earn resale revenue do not automatically qualify as securities. Unlike stocks, NFTs are programmable assets that distribute proceeds to developers or artists. The SEC official said that mirrors how streaming platforms compensate musicians and filmmakers.
“Just as streaming platforms pay royalties to the creator of a song or video each time a user plays it, an NFT can enable artists to benefit from the appreciation in the value of their work after its initial sale,” Peirce said.
Peirce added that the feature does not provide NFT owners any rights or interest in any business enterprise or profits “traditionally associated with securities.”
SEC never prohibited NFT royalties
Oscar Franklin Tan, chief legal officer of Enjin core contributor Atlas Development Services, told Cointelegraph that the recent remarks by Peirce on NFTs and creator royalties have been widely misunderstood.
Peirce had clarified that NFTs that send resale royalties to artists are not necessarily securities, a view Tan says is legally sound but mischaracterized in some media reports.
“So Hester Peirce said that an NFT that sends royalties back to the creator after a sale is not a security. This is correct, but the way some media reported this is completely out of context,” Tan told Cointelegraph. “The actual context is that this is not controversial, and it was never considered a security.”
The lawyer said US securities law focuses on regulating investments and not compensating creators for their work.
“The artist or creator is not an investor, not a passive third party in the NFT,” he said, noting that royalty payments are not considered investment income.
Instead, Tan told Cointelegraph that this type of earning is “analogous to business income,” which the SEC does not regulate. He added:
“The SEC never prohibited contracts where artists and creators get royalties from secondary sales of their work, not royalties from paper contracts or blockchain protocols.”
Tan explained that the legal distinction becomes more complicated when NFTs promise shared profits from royalties to multiple holders beyond the original creator.
Tan also urged regulators and market participants to apply traditional legal reasoning to new blockchain technologies. “Ask yourself, if this were done by pen and paper instead of blockchain, would there still be a regulatory issue?” he said. “If none, slow down.”
Related: SEC charges Unicoin crypto platform over alleged $100 million fraud
OpenSea calls on the SEC to exempt NFT marketplaces from oversight
While NFT royalties may not have been a controversial SEC issue, NFT marketplaces are a different case. In August 2024, NFT trading platform OpenSea received a Wells notice from the SEC, alleging that NFTs traded on the marketplace could qualify as unregistered securities.
On Feb. 22, OpenSea CEO Devin Finzer announced that the SEC has officially closed its investigation into the platform. The executive said that this was a win for the industry.
Following the conclusion of the SEC’s investigation, OpenSea’s lawyers penned a letter to Peirce, who leads the SEC’s Crypto Task Force. OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover said in an April 9 letter that NFT marketplaces don’t qualify as brokers under US securities laws.
The lawyers said the marketplaces don’t execute transactions or act as intermediaries. The lawyers urged the SEC to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.”
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South Korea is tightening rules around digital asset transactions as it prepares to allow institutional players into its crypto market, introducing new guidelines for nonprofit crypto sales and stricter listing standards for exchanges.
On May 20, the Financial Services Commission (FSC) of South Korea said during its fourth Virtual Asset Committee meeting that it had finalized sweeping new measures.
Set to take effect in June, the updated rules allow both nonprofit organizations and virtual asset exchanges to sell cryptocurrencies, but under new compliance standards.
Nonprofit entities must have at least five years of audited financial history to be permitted to receive and sell virtual asset donations. They will also need to establish internal Donation Review Committees to assess the appropriateness of each donation and the liquidation strategy.
To reduce risks of money laundering, all donations must be routed through verified Korean won exchange accounts, with verification responsibilities placed on banks, exchanges and the nonprofits themselves.
Furthermore, only cryptocurrencies listed on at least three major domestic exchanges will be eligible, and liquidation is expected to occur immediately upon receipt.
Related: Top South Korean presidential hopefuls support legalizing Bitcoin ETFs
Exchange sales to be restricted
Crypto exchanges will be allowed to liquidate user fees paid in crypto, but only to cover operational costs. Sales will be capped at daily limits, typically no more than 10% of the total planned amount.
Furthermore, sales will only be permitted for the top 20 tokens by market cap across five won-based exchanges. Importantly, exchanges are barred from selling tokens on their own platforms to prevent conflicts of interest.
South Korea is also tightening standards for listing digital assets. The revised rules aim to curb instability from sudden price spikes by requiring a minimum circulating supply before a token is allowed to trade and temporarily restricting market orders post-listing.
So-called zombie tokens (with low volume and thin market caps) and memecoins without clear utility will face more scrutiny. For instance, exchanges must delist tokens if they fail to meet liquidity benchmarks or community engagement thresholds.
Starting in June, exchanges and nonprofits can apply for real-name accounts to facilitate these sales. Later this year, the FSC plans to extend real-name accounts to listed firms and professional investors.
Cointelegraph contacted South Korea’s Digital Asset eXchange Association for comment, but had not received a response by publication.
Related: RedotPay enters South Korea with crypto-powered payment cards
South Korean candidates push pro-crypto agenda
South Korea’s Democratic Party leader Lee Jae-myung has proposed launching a stablecoin pegged to the Korean won, aiming to curb capital flight and bolster the country’s financial autonomy.
Speaking at a recent policy forum, Lee said a won-based stablecoin could help retain domestic wealth and reduce dependence on foreign-backed digital currencies such as USDt (USDT) and USDC (USDC).
The initiative is part of Lee’s broader push for digital asset reforms, which also includes legalizing spot crypto exchange-traded funds (ETFs).
His rival, Kim Moon-soo of the ruling People Power Party, has also expressed support for introducing spot crypto ETFs, signaling bipartisan momentum on the issue.
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