FTX Paid $12 Million To Crypto Bankruptcy Lawyers For Early Works

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Bankrupt crypto exchange FTX Ltd. paid its lead attorneys more than $12 million to handle the early parts of the closely watched Chapter 11 case, according to a court filing Wednesday.

Law firm Sullivan & Cromwell received a $12 million retainer from an FTX-controlled company shortly before the exchange filed for bankruptcy on Nov. 11, according to the filing. The company made just over $3 million, largely for work done in the days leading up to the hasty bankruptcy filing.

Quinn Emanuel also works for FTX and its board of directors as special counsel in a litigation role, pursuing legal claims that the bankruptcy estate may be able to pursue. The company received about $575,000 in the three months before the FTXs were filed, according to another court filing.

Landis Rath & Cobb, whose attorneys are FTX’s local Delaware attorneys, received a $300,000 retainer within 90 days of filing.

FTX dramatically imploded in early November, leading to the firing of co-founder Sam Bankman-Fried and the hasty Chapter 11 filing of more than 100 FTX-linked companies. In a sign of the frenetic pace, FTX did not submit typical day one documents until about 10 days after its first court appearance.

Prior to his criminal indictment, Bankman-Fried planned to testify before Congress that Sullivan & Cromwell was part of a group exerting extreme pressure to file for Chapter 11, according to a leaked transcript of his prepared remarks.

In that testimony, Bankman-Fried was to say that Sullivan & Cromwell was one of the major law firms representing the company. But Sullivan & Cromwell, in Wednesday’s court filing, said he was not lead outside counsel for any of FTX’s debtors before the bankruptcy filing.

FTX payments to Sullivan & Cromwell began in August, but increased in the days before the Chapter 11 filing. The company received about $3.1 million from Oct. 19 to Nov. 3, according to court documents. His highest-paid partner, who is not named in the document, charges $2,165 an hour.

Quinn Emanuel and Sullivan & Cromwell also represented FTX in other legal matters prior to the restructuring.

For non-bankruptcy work, Sullivan & Cromwell said it received approximately $8.5 million in legal fees and expenses from FTX from July of last year through November’s Chapter 11 filing. These charges related to specific acquisition transactions and regulatory investigations relating to certain US industries, Sullivan & Cromwell said.

Andrew Dietderich, co-head of restructuring at Sullivan & Cromwell, leads the team advising FTX and filed the statement in court on Wednesday.

Quinn Emanuel received $500,000 from FTX in April, the start of a deal that would send the law firm a minimum fee of $100,000 per month, the firm said in a court document.

The law firm has advised FTX on intellectual property disputes; represented Alameda Research in blockchain and cryptocurrency-related litigation; and advised FTX on restructuring advice related to the Chapter 11 cases of crypto exchanges Voyager Digital and Celsius Holdings.

Quinn Emanuel said he had previously signed an engagement letter with Bankman-Fried, but noted that he had not provided any legal services for him and was not currently a firm client.

This week, a panel of nine creditors hired Paul Hastings to lead its work in the FTX case.

Bankman-Fried was extradited to the United States yesterday, where he faces criminal charges in Manhattan stemming from the collapse of his business. Two of his closest confidants, Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang, pleaded guilty to fraud charges on Wednesday and are cooperating with prosecutors in the case.

The deal is FTX Trading Ltd., Bankr. D. Del., 22 11068, 12/22/22.

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