An FTX creditor Lidia Favario has raised concerns about the excessive spending by bankruptcy managers handling the defunct exchange’s proceedings, according to a court filing.
Favario, in a letter sent to John Dorsey of the Department of Justice’s guidelines for reasonable expenditures, described this spending as excessive and out of line with DOJ guidelines.
Questionable expenses
Favario cited specific examples of extravagant spending from law firms like Sullivan & Cromwell and Alvarez & Marsal (A&M), the financial advisory firm overseeing the bankruptcy process.
She said that professionals of these companies often stay in high-end accommodation, such as the 5-star Hotel Du Pont, located in Delaware.
She also pointed out a case where an A&M professional spent $971.74 for a single night at a luxury hotel in New York. They also stayed in the Grand Hyatt resort, which is a luxury oceanfront hotel located in Nassau.
The cost of transportation also created some eyebrows. Favario revealed that Kumaman Ramanathan, an A&M professional, spent $1,733 on taxi rides during a single week in November 2022—another professional billed $151.33 for a five-minute taxi ride from Hotel Du Pont to a court hearing.
The estate also paid $2,683 to have three taxis wait on FTX CEO John Ray for his deposition. Business-class travel for professionals can cost as much as $4,279 each trip.
Favario described these expenses as a blatant disregard for the estate’s funds to compensate creditors. She emphasized that many creditors, including herself, have suffered severe financial losses due to FTX’s collapse.
Favario, in order to alleviate these concerns and ensure that DOJ guidelines are followed, urged the Court to extend the scope for expense reviews. She said that requiring professional to follow reasonable standards of spending would ensure fairness throughout the bankruptcy proceedings.
Mail scams
Sunil Kavuri is another creditor who has alerted the authorities to a recent increase in phishing emails that target FTX Creditors.
This fraudulent message is intended to cause confusion over the timeframe for payment. Kavuri advised recipients to not click any links, and only rely on updates from the official claims portal.
The statement was made by:
“Scam emails are being sent out. Do not click on links. FTX has not started repayments. Only go direct to the claims portal/official sites.”
The spread of misinformation by crypto-influencers is believed to be the cause for this wave. Several influencers have incorrectly stated that FTX payments would start in January 2025.
Official statements have confirmed that payments will not be expected until March 2025.
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