FTX Finds $7.3 Billion in Liquid Assets; Lawyers Consider Rebooting Shuttered Crypto Exchange

April 13, 2023 Bitcoin.com

FTX’s bankruptcy lawyers and advisors pocket $32.5M in February

April 11, 2023 Coin Telegraph

<div>FTX's bankruptcy lawyers and advisors pocket .5M in February</div>

The reimbursement expenses for FTX’s massive team of legal professionals are just as exorbitant in February as they were the previous month.

February’s round of legal expenses for bankrupt crypto exchange FTX has been published and it remains a scary figure for debtors.

A series of court filings from April 4 to April 10 detailed the monthly fee statements for February of the law firms involved with FTX’s bankruptcy proceedings which come to a combined total of around $32.5 million.

The figure didn’t include the recompense for restructuring chief and CEO John J. Ray III who pocketed $305,000 in February according to a March court filing.

Ray’s remuneration for March came in at a similar figure, with an April 10 filing showing his total fees and expenses were $329,173.

The FTX chief billed at $1,300 per hour and reported working 255.9 hours for the period of Mar. 1 to Mar. 31. This makes his fees a whopping $327,470, with the remaining $1,703 for airfares, lodging, transport, meals, and other expenses.

*John J Ray III's expenses and hourly billings for the month of March. Source: Kroll*

The law firm Quinn Emanuel Urquhart and Sullivan sought a total of over $2.7 million in reimbursements for February. Partners at the firm billed between $1,246 and $1,917 per hour and associates billed between $747 and $1,183 per hour. The total number of hours billed for the firm was nearly 2,610.

*A 167-page fee statement from Quinn* *Emanuel Urquhart & Sullivan outlined that its largest billing was for "investigation." Source: Kroll*

April 4 filings for the law firm Alvarez and Marsal and forensic investigation consultant Alix Partners detailed their February fee statements totaled over $11.9 million and around $3.6 million respectively.

The largest amount sought was from law firm Sullivan and Cromwell which billed a total of over $13.4 million for work carried out for FTX in February by their burgeoning team of lawyers and associates.

*Sullivan and Cromwell's employees collectively spent over 12,000 hours working on FTX in February. Source: Kroll*

Meanwhile, on the lower end of the scale, investment banking firm Perella Weinberg Partners billed $77,891 while bankruptcy co-council Landis Rath and Cobb invoiced $582,604 for February.

Advisors and lawyers for the bankrupt exchange billed a similar amount in January, with FTX shelling out $34.18 million for their combined services in January according to earlier court documents.

The fees, reimbursements, and expenses that FTX has forked out to its phalanx of lawyers, associates, paralegals, accountants, investigators, directors, and executives remain tough to swallow for customers still waiting for recompense.

The bankruptcy is far from over and it's reported that Sullivan and Cromwell alone will reap hundreds of millions of dollars before the firm’s bankruptcy investigation wraps up.

Feature: All rise for the robot judge: AI and blockchain could transform the courtroom

Former FTX CEO Seeks $10M Insurance Fund for Legal Defense, Request Opposed by FTX Debtors and Unsecured Creditors

March 30, 2023 Bitcoin.com

FTX lawyers, creditors slam SBF’s petition to get legal fees reimbursed

March 30, 2023 Coin Telegraph

claim

The creditor's committee and FTX lawyers have raised several arguments in objecting to Bankman Fried’s request. A hearing date is set for April 12.

Sam Bankman Fried’s new petition to have his legal expenses reimbursed has been met with fierce objection from lawyers representing the crypto exchange and its creditors committee.

As per previous reporting by Cointelegraph, Bankman-Fried’s lawyers had filed a motion on March 15 seeking to have his court costs covered by directors and officers (D&O) insurance policies, which if approved by the judge would see him placed at the top of the payout queue.

Defense costs are covered in most policies (after a deductible) but insurers have provisions for selection of counsel so even if approved the insurer is unlikely to approve the high priced lawyers SBF has (or needs).
— Mr. Purple (@MrPurple_DJ) March 16, 2023

In March 29 objection filing, FTX’s lawyers objected to Bankman-Fried’s attempt to prioritize his own legal fees at the expense of other potential claimants, stating:

“It would be unfair, inequitable, and contrary to the interests of justice to allow Mr. Bankman-Fried to drain the D&O Policies for his sole benefit”

FTX’s lawyers argue that if the court rules in favor of Bankman-Fried then the insurance payout should apply to other directors and officers who have a claim to the funds.

The Official Committee of Unsecured Creditors also filed an objection on the same day, noting that D&O insurance policies only apply “where they make honest decisions in the ordinary course of the business,” which it argues “is not the case” regarding Bankman-Fried’s request.

The committee argued that the court should thus decline the request, labeling Bankman-Fried the “alleged perpetrator of one of the largest criminal frauds in the last decade.”

This sentiment has been echoed by some from the crypto community prior to Sam Bankman Fried’s request.

Directors and officers (D&O) liability insurance is a type of insurance coverage that protects individuals from personal losses if they are sued as a result of serving as a director or an officer for a firm. Such policies can also be used by the firm to cover legal fees and costs incurred as a result of a lawsuit against a former officer or director.

The creditors committee however argued that Bankman-Fried had failed to justify his claim to the $10 million in available coverage which should instead go towards covering FTX’s losses.

According to reports, the former FTX CEO is currently paying his legal fees with $10 million he had previously gifted to his father Joseph Bankman, after Bankman-Fried loaned the funds from Alameda Research.

Bankman-Fried was charged with 12 criminal counts on Feb. 22, which included numerous fraud charges, and was rounded up to a baker’s dozen on Feb. 28 following allegations that he used $40 million in an attempt to bribe a Chinese official.

Web3 Gamer: Shrapnel wows at GDC, Undead Blocks hot take, Second Trip

Ripple Lawyer Argues SEC Chair Gensler Has Prejudged Crypto Asset Cases

March 1, 2023 Bitcoin.com

‘It would be absurd’ for a US court to rule private NFTs as securities: Lawyer

February 23, 2023 Coin Telegraph

Coin Telegraph

The comments from the hosts of lawyers comes as Judge Victor Marreo said that Dapper Labs’ NBA Top Shot Moments NFT may constitute a security.

Blockchain Association’s chief legal officer says “it would be absurd” for a United States court to rule that digital assets on private blockchains are securities, following a federal judge's decision to allow a lawsuit against Dapper Labs's NBA Top Shots NFTs to play out.

U.S. attorney Jake Chervinsky made the comment after federal judge Victor Marreo denied a motion to dismiss a 2021 lawsuit that accused Dapper Labs of selling nonfungible tokens (NFTs) as unregistered securities.

Chervinsky was among a host of lawyers on Twitter to reiterate that the judge’s denial of the motion does not mean a ruling has been made on the lawsuit, only that it was “facially plausible.”

“The judge didn't decide anything. He allowed the case to proceed past a motion to dismiss because the securities claims were at least ‘plausible,’ an extremely low bar and not a final ruling at all,” he explained.

“This dispute aside, it would be absurd if all valuable digital assets stored on centralized databases were securities.”

“This would turn every major video game developer, event ticketing platform, travel rewards program, etc. into a public reporting company regulated by the SEC,” he explained.

This is false.

The judge didn't decide anything. He allowed the case to proceed past a motion to dismiss because the securities claims were at least "plausible," an extremely low bar and not a final ruling at all.

Do I really have to say "basketball cards are not securities"??? https://t.co/W1yYVcW1Ki
— Jake Chervinsky (@jchervinsky) February 22, 2023

Another U.S. lawyer, Jesse Hynes, also weighed in on the motion in a Feb. 22 Twitter post, noting that motions to dismiss are “rarely ever successful” because the plaintiff only needs to plead enough evidence for the case to proceed.

“The judge ruled in the Dapper case that the plaintiff pled enough evidence that IF ALL THE ALLEGATIONS ARE TRUE, that there is a securities violation.”

“Now we go into discovery to learn what the real facts are. Once that is done Dapper will likely file for a motion for Summary Judgment,” the lawyer added.

Meanwhile, another U.S. lawyer, James Murphy — known as “MetaLawMan” — noted that the allegations that Dapper Labs issued the NBA Top Shot Moments NFT on a privately-run blockchain were a “fundamental” factor behind the court’s decision to reject the motion to dismiss.

4/ The Judge cited the fact that Top Shots trade on a Private blockchain run by the Issuer as a key factor in his ruling.@XRP trades on a Public blockchain.

For this reason, the Top Shot opinion could be considered net positive for Ripple.

Not a legal opinion--just a tweet.
— MetaLawMan (@MetaLawMan) February 22, 2023

This prompted MetaLawMan to suggest that this “could be considered a net positive” for Ripple in its own case against the U.S. Securities Exchange Commission (SEC), because XRP is issued on a public blockchain.

The class action lawsuit against Dapper Labs was filed in May 2021 by plaintiff Jeeun Friel, who claimed that Dapper Labs was selling NFTs as unregistered securities.

Judge Marreo denied the motion to dismiss the lawsuit on Feb. 22. He said that the particular scheme by which Dapper Labs offers the Moments NFT possibly creates a sufficient legal relationship between investors and themselves, which satisfies the investment contract criteria under the Howey Test.

However, it's unlikely the ultimate ruling of this case would establish a precedent for NFTs, as Judge Marreo said that not all NFTs will constitute securities and that each case will need to be assessed on a case-by-case basis.

Shortly after the dismissal, the Dapper Labs-issued FLOW token fell 6.4% from $1.24 to $1.16 in 15 minutes. However the FLOW token has since rebounded at $1.29, according to CoinGecko.

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