FTX Bankruptcy Fourth Anniversary: Nearly 1 Billion USD in Service Fees, Supporting a Liquidation Business That Won't Stop

Author: David, Deep Tide TechFlow

On November 11, 2022, FTX filed for bankruptcy, exactly four years from yesterday.

Four years later, the most talked-about news is SBF serving 25 years in prison and creditors having recovered over 100% of their payouts. But few ask who handled this bankruptcy and how much they took away.

When a company declares bankruptcy, the matter does not end with the court. Someone needs to take over the company, clarify the accounts, recover the scattered funds, litigate with those owed money and those who owe money, and finally distribute the money proportionally.

This work is detailed and lengthy, so FTX hired a professional team.

Leading the team is John Ray, a restructuring expert who specializes in handling bankrupt companies, previously managing the bankruptcy of the American energy giant Enron. He has a law firm, a financial consulting company, and a bunch of other advisors under him.


These people charge by the hour, with the money coming from FTX's remaining assets, which is the money that was originally supposed to be returned to creditors.

According to foreign media statistics, from August to October 2023, this team's bill was at least $118 million. Averaged over three months, that’s $1.3 million a day, or $53,000 an hour.

The bankruptcy of FTX is itself a business with bills, charging parties, and controversies.

### First Earn $1 Billion

How big is this business?

Bloomberg reviewed court records in February 2025. By January 2, 2025, FTX had paid over $948 million to more than a dozen institutions, commonly referred to as the cleanup service fees.

Leading the charge are two firms.

One is the law firm Sullivan & Cromwell, abbreviated as S&C. FTX hired it as its top law firm, handling lawsuits, debt collection, and dealings with the court. It received about $249 million, which calculates to a maximum hourly rate of $2,165 for partners.

The other is the consulting firm Alvarez & Marsal, which specializes in managing the accounts of bankrupt companies. FTX's funds are scattered across more than 130 affiliated companies, requiring meticulous reconciliation, and this firm received about $306 million, even more than the law firm.

There’s another easily overlooked amount. In bankruptcy cases, creditors elect a committee to oversee the entire process. The lawyers and consultants hired by this committee also draw from the bankruptcy assets, totaling about $110 million.


Throughout American history, the most expensive bankruptcy case was Lehman Brothers during the 2008 financial crisis, which cost about $6 billion to resolve. FTX's nearly $1 billion also ranks among the most expensive.

In the cryptocurrency industry, it stands out even more. The similarly bankrupt lending platform Celsius had a bill of $87 million in its first half, while FTX exceeded $200 million in its first seven months.

Why is handling bankruptcy so expensive? The explanation from the management team and lawyers is the same:

The accounts are a complete mess.

FTX had almost no proper accounting records, with money scattered across more than 130 affiliated companies. To recover these funds, a large number of people must check each account, and in the first three months, there were 242 lawyers billing for this case.

The messier the accounts, the more time it takes, and since these people charge by the hour, the bills just keep growing.

With such large bills, someone naturally needs to check for any discrepancies. The court appointed an independent fee examiner, Katherine Stadler, to meticulously review the bills submitted by the law firms and consultants to check for overcharges or duplicate charges and to advise the court on whether to approve them.

Her first batch was the bills from the first three months, totaling $88.8 million, and she recommended the court approve $85.1 million, which is most of it.

When she submitted her summary report in June 2023, the bills for the first seven months had already exceeded $200 million. Her assessment was that this figure is indeed astonishing, but these people are dealing with a huge mess and performing excellently.

Money spent has indeed recovered assets. According to experts quoted by Bloomberg, creditors can today recover 118% thanks to these lawyers and consultants who retrieved the scattered assets one by one.

### No Motivation to Conclude the Case

In the massive machine of bankruptcy, chaos is never an obstacle. Chaos is a productive resource.

The more FTX's accounts resemble a tangled mess, the more justified the liquidation team's bills become. The trust's financial report shows that in just the first quarter of this year, operating expenses reached $85 million. This means that every day, regardless of how much asset is recovered, nearly $1 million is already being drawn from the pool that belongs to the creditors.

This daily expense of $1 million sustains a massive and prolonged legal war of attrition.

As the bankruptcy case enters deeper waters, what remains are all the tough bones to chew on. First, there are disputed claims amounting to nearly $2 billion, which the trust does not recognize, and claimants do not withdraw; every verification and negotiation requires court hearings, evidence collection, and legal opinions; next are the scattered recovery lawsuits, with the trust suing various institutions and individuals who withdrew funds before FTX's collapse, with lawsuits coming one after another, and even if only a few million dollars can be recovered after months, the litigation machine must never stop.

There was even an absurd episode in between:

The trust once applied to the court to suspend payments to creditors in 49 countries and regions, including China, citing "local legal restrictions," involving about $800 million. Faced with over 70 fierce objections, the trust quietly withdrew the application four months later. In this back-and-forth, the victimized creditors received nothing, but the law firms and consulting advisors steadily billed hundreds of hours of senior partner time for this compliance paperwork.

The hourly billing system creates no incentive for professionals to conclude cases quickly.

In the traditional business world, time is a cost that companies must compress; but in the business of bankruptcy restructuring, time itself is a priced profit.

### The Most Expensive Mediocrity

If high legal fees are visible bleeding, then the bankruptcy team's "defensive mediocrity" in asset disposal is a larger hidden loss that creditors must swallow.

Aside from the tokens on hand, SBF's most valuable legacy was a batch of equity investments. The largest of these was a $500 million investment in the AI unicorn Anthropic in 2021, which secured about 8% of the shares.

In the first half of 2024, the trust team responsible for managing the assets sold this equity in two batches at about $30 per share, cashing out a total of about $1.3 billion. Compared to the initial $500 million entry cost, the restructuring team presented themselves well in court, announcing they had "netted creditors $800 million."

However, in the logic of tech investment, this was the most brutal premature exit.

Just after the liquidation team hurriedly cashed out, the super wave of generative AI swept the globe. Anthropic subsequently received new rounds of heavy investment from tech giants, with its valuation skyrocketing geometrically. According to subsequent market fair valuations, the shares that were hastily sold off had already multiplied in value several times, with potential appreciation space reaching tens of billions of dollars.

This was a super Alpha that could have provided all creditors with more ample compensation, even fully covering inflation losses, but it was completely abandoned before dawn.

Such an absurd contrast rarely appears in business history:

The gambler SBF, who had no internal controls and casually misappropriated client assets, instinctively bet on today's leading AI giants; while the professional army composed of the top bankruptcy lawyers and restructuring experts in the U.S. completed a hasty cash-out before the wind truly took off, out of an almost instinctive "risk aversion."

For the bankruptcy pipeline, they bear no legal responsibility for "missing out"; their primary legal principle is "defensive risk aversion"; as long as they convert to cash and deposit it in the bank, completing the rigid repayment on the balance sheet, their work is impeccable.

This mediocrity and correctness within the system ultimately imposed an extremely expensive opportunity cost on the creditors.

### The Ultimate Winners in the Revolving Door

As bills stretch and assets are liquidated at a discount, the deepest fissures of this bankruptcy drama ultimately fall on the ethical role of the liquidators themselves.

In early 2024, a group of FTX creditors officially sued Sullivan & Cromwell (S&C) in federal court in Miami, the very law firm that took about $250 million from the bankruptcy assets.

Creditors accused it of being deeply involved in FTX's affairs even before the bankruptcy, having handled up to 20 legal matters for FTX in the 16 months leading up to the collapse, covering regulatory reviews and complex acquisition cases.

The creditors' anger is evident: the people now sitting in the judge's seat and at the liquidation table, charging exorbitant hourly rates, were precisely the ones sitting next to that mess at the card table back then.

S&C quickly applied to dismiss the charges, citing the bankruptcy court's designation of "disinterested parties." In the vast legal maze of bankruptcy restructuring, such lawsuits are highly likely to drown again in lengthy procedural reviews. And every minute spent on the review still translates into dollars on the bill.

Four years have passed, and the aftermath of FTX presents a peculiar dark humor:

The instigator SBF counts his 25-year sentence in federal prison; creditors, after a long wait of over four hundred days and nights, finally receive their delayed fiat payments; while the Wall Street elite team that walked in with briefcases remains completely unscathed and has profited immensely.

They calmly dismantle the ruins, sell off the most imaginative assets, avoid all potential professional risks, and timely present nearly $1 billion in service bills.

For the cryptocurrency world, FTX's collapse is a catastrophic disaster; but for the bankruptcy liquidation industry, it is merely another perfectly delivered billion-dollar deal.

SBF's story has come to a complete end, but as long as there is a balance on the books, this lucrative business revolving around the ruins will never easily conclude.