The spectacular collapse of cryptocurrency exchange FTX has achieved another dubious distinction - becoming one of history's most expensive corporate bankruptcies, with legal fees approaching $1 billion.
According to recent reports, courts have approved $952 million in fees to over a dozen law firms handling the FTX bankruptcy case, with $948 million already paid out. This places FTX's bankruptcy costs behind only Lehman Brothers ($6 billion) and Nortel Networks ($2 billion) in total legal expenses.
The astronomical costs stem largely from FTX's chaotic internal operations. Despite managing billions in assets, the company relied on basic tools like Google Docs, Slack, and Excel spreadsheets. Its accounting was managed through QuickBooks, software typically used by small businesses. The company even maintained a folder labeled "Ask My Accountant" containing 80,000 unprocessed transactions.
John Ray III, the insolvency expert overseeing the bankruptcy who previously handled Enron's liquidation, described FTX's situation as unprecedented, noting he had never encountered "such a complete failure of corporate controls."
Yet despite mounting legal costs, there appears to be a silver lining for FTX customers. The company expects to recover approximately $16.3 billion from asset sales, while owing $11 billion to customers and creditors. This suggests customers could potentially receive 118% of their account values, though government regulators and shareholders are likely to face losses.
Meanwhile, as lawyers continue untangling the financial web, former CEO Sam Bankman-Fried has returned to social media, sharing thoughts about organizational inefficiencies - an ironic development given FTX's documented internal chaos.
The FTX bankruptcy saga demonstrates that while going broke may be expensive, proper corporate governance and financial controls are ultimately priceless.