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Sam Bankman-Fried’s criminal trial might not be due to begin until later this year, but there’s no shortage of daily drama in the courtroom.
New details have emerged about how much money has been spent on legal services following FTX’s dramatic bankruptcy — as well as plans to pay millions of dollars in bonuses to key staff.
And if all that wasn’t enough, SBF’s legal team has indicated that October 2023 may be too soon for the trial to begin in Manhattan if the 30-year-old is to have enough time to prepare.
Let’s go through all of these developments in turn.
READ MORE: Everything We Know About the FTX Saga So Far
Documents filed in bankruptcy court show just how expensive bankruptcy proceedings can be.
Ever since FTX went under in November, law firms have been instructed to go through the exchange’s books with a fine tooth comb — all in the hope of uncovering the missing billions that are owed to customers. Meanwhile, new management has been brought in — with chief restructuring officer John Ray best known for cleaning up after Enron.
We’ve long known that Ray charges $1,300 an hour, but court filings reveal how that stacks up over the course of a month. In February alone, his total compensation came in at a jaw-dropping $307,851 — including $2,286 of expenses. And while some will argue this is value for money given his experience and track record, this is a bill that will be footed by FTX customers.
Crunching the numbers, his 239.8 billable hours last month equate to about eight hours a day of work — and that’s including weekends. There’s also a comprehensive breakdown of what he spent time on and when. One example includes a “review of Kroll website posting contents” for 0.3 hours — resulting in a charge of $390.
All of this being said, Ray’s expenses are modest. No meals were put on FTX’s tab, and the cost of lodgings for the whole of February came in at $1,400 — with a $225 airfare and a $565 bill for other modes of transportation.
And that’s just the tip of the iceberg. Court filings have also revealed that Sullivan & Cromwell, the main law firm working on the case, billed a jaw-dropping $16.8 million in January alone. Some of its partners charge an hourly rate of $2,165. All of this follows a bill of $9.5 million for the 18 days of November after FTX went bankrupt, not to mention $15.4 million in December.
Another big expense comes in the form of the consulting firm Alvarez & Marsal — their invoice came in at $12.3 million for the same month.
With seven months left to go until SBF’s criminal trial begins, the total cost of lawyering up could extend into many hundreds of millions of dollars — ultimately eroding the payouts that FTX customers receive. This could also help explain why the judge in the case has resisted calls from the Department of Justice to shell out $100 million on an independent examiner.
In other developments, FTX’s new management has also put forward a key employee retention plan that’s designed to ensure critical workers won’t jump ship to other companies.
This is a common part of bankruptcy proceedings that has been seen with other crypto firms that have gone bust in recent months, but it still may rub salt in the wounds of creditors.
Overall, FTX is now seeking court approval to award a total of $4 million to a small group of crucial personnel — with $1.4 million to be shared between 10 specific employees who are “key to the success” of the Chapter 11 case. However, the filing stresses that Sam Bankman-Fried, Gary Wang, Caroline Ellison and Nishad Singh would not be beneficiaries of this fund.
Outlining why such a plan was necessary, the filing pointed out that 130 out of 470 FTX employees and contractors had resigned up to the end of January 2023 — including three key personnel. And to make matters worse, many of these workers are now receiving less compensation because bonuses have been suspended.
A hearing is going to be held about the key employee retention plan on March 29, and objections to the proposals can be filed until March 22.
Meanwhile, there are rumblings that SBF’s legal team could push for his criminal trial in October to be delayed.
His lawyer Mark Cohen has written a letter to the judge to raise a number of concerns.
One of them is that SBF is currently attempting to get access to the FTX transactional database so he can prepare for the legal proceedings — a process that has taken several weeks.
Security measures required by FTX’s new management require that this portal is accessed through a virtual private network on a dedicated laptop — but after Bankman-Fried used a VPN last month (apparently to watch the Super Bowl,) bail conditions have been tightened to stop this from happening again.
Cohen expected that this issue will be ironed out given that there are no objections from the government — but warned ” it may take some time before a new laptop computer can be built according to the specifications that the court may impose.” It’s been requested that he is allowed to use an existing device that means he can access the transactional database through a VPN connection — on the condition that he can visit no other websites.
The attorney went on to argue that — given the addition of new criminal charges and the absence of a “substantial portion” of discovery — the government should provide a firm deadline of when outstanding materials will be delivered, and key dates in the run-up to the trial should be pushed back.
Right now, the defense’s pretrial motions are due to take place on April 3, followed by a government response on April 24 and a reply from the defense on May 8. Cohen has requested for all of these dates to be pushed back by about a month. His letter finished by warning: