Were FTX's Canceled Reboot Plans Actually Scams? Former SEC Official Speaks Out

The canceled restructuring of bankrupt cryptocurrency exchange FTX has raised serious concerns about the profits made by the legal team handling the bankruptcy.

Former SEC commissioner John Reed Stark described FTX's restructuring plan as a rip-off.

He also clarified that lawyers for the FTX bankruptcy team should send thank-you notes to all FTX customers. According to Stark, the FTX legal bankruptcy team likely made a large amount of money from this process.

Over a year ago, Stark predicted that FTX's Chapter 11 restructuring would never happen. Despite this, the FTX bankruptcy team, which Stark claimed to have demanded tens, perhaps even hundreds of millions of dollars, insisted on promoting the idea that FTX could bounce back and become a regulated, successful financial company.

A year later, according to a Reuters report, FTX will apparently conduct a Chapter 7 liquidation. Stark questioned the amount of legal and advisory fees received from FTX before reaching this conclusion.

Reports show that FTX bankruptcy law and other professionals charge an average of $1800 per hour ($2375 per hour for top law firm partners), earn up to $1.5 million per day, and have generated close to $250 million in total revenue to date (reported at $225 million by November 2023).

A law firm that handled the FTX bankruptcy would have generated so much revenue that it would have been among the top 200 law firms in the U.S., even if the firm had taken no other business last year.

Stark, who is not a bankruptcy lawyer but has taught at Georgetown and Duke law schools for 20 years and has worked in cyber, business, law and technology for more than 35 years, considers these fees excessive and his Chapter 11 plan completely fanciful.