Bankrupt crypto exchange FTX Ltd. paid its lead lawyers more than $12 million to handle the earliest portions of the closely watched Chapter 11 case, according to a Wednesday court filing.
Law firm Sullivan & Cromwell received a $12 million retainer from an FTX-controlled company shortly before the exchange’s Nov. 11 bankruptcy filing, the filing shows. The firm has drawn a little more than $3 million of that, largely for work done in the days leading up to the rushed bankruptcy filing.
Quinn Emanuel is also working for FTX and its board of directors as special counsel in a litigation capacity, looking for legal claims the bankruptcy estate might be able to bring. The firm received about $575,000 in the three months leading up to FTX’s filing, according to another court filing.
Landis Rath & Cobb, whose lawyers are FTX’s local Delaware counsel, received a $300,000 retainer in the 90 days leading up the filing.
FTX imploded in spectacular fashion in early November, leading to the firing of co-founder Sam Bankman-Fried and a rushed Chapter 11 filing of more than 100 FTX-related companies. In a sign of the hurried pace, FTX didn’t submit typical “first-day” filings until about 10 days after it initially went to court.
Prior to being criminally charged, Bankman-Fried planned to testify before Congress that Sullivan & Cromwell was part of a group applying “extreme pressure” to file for Chapter 11, according to a leaked transcript of his prepared remarks.
In that testimony, Bankman-Fried was scheduled to say Sullivan & Cromwell was “one of the primary” law firms that represented the company. But Sullivan & Cromwell in Wednesday’s court filing said it was “not primary external counsel” to any of the FTX debtors prior to the bankruptcy filing.
FTX’s payments to Sullivan & Cromwell began in August but ramped up in the days prior to the Chapter 11 filing. The firm received about $3.1 million from Oct. 19 through Nov. 3, according to court documents. Its highest-paid partner, who’s not named in the document, charges $2,165 per 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 had received about $8.5 million in legal fees and expenses from FTX from July last year through November’s Chapter 11 filing. Those fees were for “acquisition transactions and specific regulatory inquiries relating to certain U.S. business lines,” Sullivan & Cromwell said.
Andrew Dietderich, co-head of restructuring for Sullivan & Cromwell, is leading the team advising FTX and filed the court declaration Wednesday.
Quinn Emanuel received $500,000 from FTX in April, the start of an agreement that would send the law firm a minimum $100,000 fee per month, the firm said in a court document.
The law firm advised FTX on intellectual property disputes; represented Alameda Research in blockchain and cryptocurrency disputes; and advised FTX on restructuring advice related to the Chapter 11 cases of crypto exchanges Voyager Digital and Celsius Holdings.
Quinn Emanuel said it had previously signed an engagement letter with Bankman-Fried, but noted it has not performed any legal services for him and he’s not currently a firm client.
A nine-member creditors committee this week hired Paul Hastings to lead its work in the FTX case.
Bankman-Fried was extradited to the US yesterday, where he faces criminal charges in Manhattan stemming from his company’s collapse. Two of his closest confidantes, Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang, pleaded guilty to fraud charges Wednesday and are cooperating with prosecutors in the case.
The case is FTX Trading Ltd., Bankr. D. Del., 22 11068, 12/22/22.