Four Years After FTX's Bankruptcy: When Bankruptcy Itself Becomes a Business

On November 11, 2022, FTX filed for bankruptcy — exactly four years ago as of yesterday.

Four years on, most of the coverage is about SBF serving 25 years in prison and creditors having recovered more than 100% of their payouts. But few ask who handled this bankruptcy, and how much they took.

When a company declares bankruptcy, things don't end when it's handed over to the court. Someone has to take over the company, untangle the books, track down money scattered everywhere, litigate against those owed and those who owe, and finally distribute the money pro rata.

The work is painstaking and long, and FTX brought in a professional team.

Leading it is John Ray, the restructuring specialist in the photo below who makes a career of taking over bankrupt companies and previously cleaned up the bankruptcy of US energy giant Enron. Under him were a law firm, a financial advisory firm and a pile of other advisors.

These people bill by the hour, and the money comes out of FTX's remaining assets — that is, out of the money that was supposed to go back to creditors.

According to tallies by foreign media, from August to October 2023 this team's bills came to at least US$118 million. Averaged over the three months, that's US$1.3 million a day — US$53,000 an hour.

FTX's bankruptcy is itself a business, with bills, payees and controversies.

First, Earn US$1 Billion

How big is this business?

Bloomberg went through the court records in February 2025. As of January 2, 2025, FTX had paid more than a dozen firms a total of US$948 million — commonly called the labor fee for cleaning up the mess.

Two firms lead the pack.

One is the law firm Sullivan & Cromwell, or S&C. FTX hired it as lead counsel, and litigating, chasing debts and dealing with the court in the case basically all fell to it. It took about US$249 million, which works out to partners charging up to US$2,165 an hour.

The other is the consulting firm Alvarez & Marsal, which specializes in straightening out the books of bankrupt companies. FTX's money was scattered across more than 130 affiliated companies and had to be reconciled one entry at a time; this firm took about US$306 million, more than the law firm did.

There is another item that is easily overlooked. In a bankruptcy case, creditors elect a committee to keep watch over the whole process on their behalf. The lawyers and advisors that committee hires also draw from the bankruptcy estate — about US$110 million cumulatively.

Looking across US history, the most expensive bankruptcy was Lehman Brothers in the 2008 financial crisis, whose administration cost about US$6 billion. FTX's nearly US$1 billion puts it in the most expensive tier as well.

Within crypto it stands out even more. Celsius, a lending platform that also went bankrupt, ran up US$87 million in bills in its first six months; FTX passed US$200 million in its first seven months.

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

The books are a mess.

FTX had barely any proper accounting records, and its money was scattered across more than 130 affiliated companies. Recovering it entry by entry required a large number of people checking account by account — in the first three months alone, 242 lawyers billed time on the case.

The messier the books, the more time it takes, and since these people bill by the hour, the bills just keep rolling up.

With bills that large, someone naturally has to check whether they've been padded. The court appointed an independent fee examiner for the case, Katherine Stadler, to go through the bills submitted by law firms and advisors line by line, check for overcharges and duplicate charges, and then recommend whether the court should approve them.

Her first batch was the bills for the first three months, US$88.8 million, of which she recommended the court approve US$85.1 million — most of it.

When she filed her summary report in June 2023, the bills for the first seven months had already exceeded US$200 million. Her assessment: the number really was staggering, but these people were facing a mess, and their performance was equally outstanding.

The money was spent, and things really were recovered. According to experts cited by Bloomberg, creditors' ability to recover 118% today is thanks to these lawyers and advisors tracking down scattered assets one by one.

No Incentive to Wrap Up the Case

In the giant machine of bankruptcy, chaos is never an obstacle. Chaos is a means of production.

The more tangled FTX's books look, the more self-assured the liquidation team's bills become. Financial statements filed by the trust show that in the first quarter of this year alone, operating expenses ran as high as US$85 million. That means the restructuring team, the moment it opens its eyes each day, has already had nearly US$1 million drawn from the pool that belongs to creditors — regardless of how much it has recovered.

That US$1 million a day sustains an enormous, protracted legal war of attrition.

As the case moves into deep water, everything that remains is hard bone. First, nearly US$2 billion in disputed claims: the trust won't recognize them, the claimants won't back off, and every reconciliation and negotiation requires hearings, evidence gathering and legal briefs. Then there are the clawback suits scattered in every direction, as the trust sues the institutions and individuals who pulled money out before FTX collapsed, one case after another — even if a case takes months and ultimately recovers only a few million dollars, the litigation machine must never stop.

Along the way there was even an absurd interlude:

Citing "local legal restrictions," the trust once asked the court to suspend payouts to creditors in 49 countries and regions, including China, involving about US$800 million. Faced with more than 70 fierce objections, the trust quietly withdrew the request four months later. In that advance and retreat, the aggrieved creditors didn't get a cent, but the law firms and consultants reliably racked up hundreds more hours of senior partner time on the compliance paperwork generated by the back-and-forth.

The billable-hours system means that, in commercial logic, these professional elites have no incentive whatsoever to bring the case to an early close.

In the traditional business world, time is a cost companies must compress; in the business of bankruptcy restructuring, time itself is profit with a price tag attached.

The Most Expensive Mediocrity

If exorbitant legal fees are the visible bleeding, the bankruptcy team's "defensive mediocrity" in disposing of assets is the larger hidden loss creditors have swallowed.

Beyond the tokens on hand, SBF's most valuable legacy was a set of equity investments. The biggest single one was the US$500 million put into AI unicorn Anthropic in 2021, for a stake of roughly 8%.

In the first half of 2024, the trust team in charge of the assets sold the entire stake in two tranches at about US$30 per share, raising roughly US$1.3 billion in total. Against the original US$500 million entry cost, the restructuring team delivered a respectable result in court, announcing that it had "netted US$800 million" for creditors.

But by the logic of technology investing, this was the most brutal case of getting off the train far too early.

Just after the liquidation team cashed out in a hurry, the generative AI supercycle swept the globe. Anthropic went on to receive successive multibillion-dollar injections from tech giants, and its valuation exploded exponentially. On subsequent fair-market valuations, the shares that were hastily sold are worth several times what they fetched, with potential upside in the billions of dollars.

This super-alpha — which could have given all creditors far more ample compensation and even fully covered their inflation losses — was abandoned wholesale just before dawn broke.

Business history rarely offers such an absurd contrast:

SBF, the gambler with no internal controls who freely misappropriated customer assets, bet on today's leading AI giant on chaotic instinct; while a professional corps built from the country's top bankruptcy lawyers and restructuring experts, out of an almost instinctive urge to avoid risk and dodge blame, pulled off a stampede-style cash-out just before the real takeoff.

For the bankruptcy pipeline, they bear no legal liability for "missing out"; their statutory first principle is "defensive risk avoidance." As long as the assets are converted into dollar cash sitting in a bank and a rigid repayment in fiat currency is delivered, their work is unimpeachable.

That kind of institutional mediocrity and correctness ultimately left creditors bearing an extremely expensive opportunity cost.

The Ultimate Winner in the Revolving Door

As the bills stretch out and assets are cashed out at a discount, the deepest fissure in this bankruptcy drama finally lands on the role ethics of the liquidators themselves.

In early 2024, a group of FTX creditors formally sued Sullivan & Cromwell (S&C) in Miami federal court — the very lead bankruptcy firm that took about US$250 million out of the estate.

Creditors allege that it was deeply involved in FTX's affairs well before the bankruptcy, handling as many as 20 legal matters for FTX in the 16 months before the collapse, covering regulatory reviews and complex acquisitions.

The creditors' anger is plain: the people now sitting in the judge's seat and at the liquidation bench, drawing astronomical hourly rates, were back then sitting right beside that mess at the card table.

S&C quickly moved to dismiss, citing the bankruptcy court's determination that it was a "disinterested party." In the vast legal maze of bankruptcy restructuring, such lawsuits are very likely to be drowned once again in lengthy procedural review. And every minute that review costs still turns into dollars ticking on a bill.

Four years on, the FTX endgame offers a peculiar sort of black humor:

SBF, who started it all, is counting out his 25-year sentence in federal prison; creditors, after more than 400 long days and nights, finally got their belated fiat payouts; and the ones truly unscathed and raking it in are that corps of Wall Street elites who walked in carrying briefcases.

They calmly dismantle the ruins, sell off the most imaginative assets, dodge every potential career risk, and deliver a service bill of nearly US$1 billion right on time.

For crypto, FTX's collapse was a catastrophe; but for the bankruptcy liquidation industry, it was just another perfectly delivered billion-dollar engagement.

SBF's story is fully over, but this nice business that runs on ruins will never wrap up easily — as long as there is still a balance on the books.

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