John J. Ray III, who led FTX’s restructuring and efforts to return billions of dollars to customers after it imploded in 2022, stands to collect bonuses totaling $41 million.
Ray — who also oversaw the liquidation of Enron Corp. — and his consulting firm, Owl Hill Advisory LLC, are in-line to receive a $3 million completion fee and $38 million incentive fee under his court-approved compensation package, according to court papers filed by FTX on Sunday. The size of the awards could be challenged by creditors or the U.S. Justice Department’s bankruptcy unit and must be approved by a judge.
The size of the bonus is a reflection of Ray’s work achieving “a hugely successful and, in many ways, unprecedented” resolution of the massive and complex crypto bankruptcy, FTX said in court papers. If approved, Ray’s bonuses would push the total cost of FTX’s bankruptcy to just shy of $1 billion.
FTX said the proposed payment was justified, noting higher than anticipated customer payments while comparing the award to executive pay at other large companies. In similar bankruptcy cases, the firm said, the top restructuring executives got an average pay of nearly half of a percentage point of what creditors recovered. In this case, Ray is getting less than one-third of 1% of recoveries, by their calculations. Chief executives, running comparably-sized public companies received average pay of $16.7 million, FTX said.
“Mr. Ray took command of a sinking ship and immediately became an indispensable asset for all of the Debtors’ advisory teams (including the prudent hires that he made),” FTX said. “He utilized his prior experience to not only prevent complete disaster but produce an overwhelmingly positive outcome for all stakeholders involved.”
In October, Judge John Dorsey called the proceedings “a model case” for dealing with a very complex Chapter 11 bankruptcy.
An FTX spokeswoman declined to comment.
Customer claims traded between 10 cents and 14 cents on the dollar after the exchange collapsed in November 2022, indicating the market expected only about $1 billion would be returned to customers, FTX said. But distributions to FTX customers are now expected to exceed $12.5 billion under a plan that pays customers between 119% to 143% on their claims which are valued at the time the company filed Chapter 11, the company said.
Law firms and other advisers who tracked down billions of dollars in digital assets and cash scattered across a byzantine network of accounts and legal entities operating under the FTX umbrella have been paid $948 million and $952 million in fees have already been approved by the court, Bloomberg New reported last week. Ray’s consulting firm has already been paid more than $8 million, according to court records.
FTX on Sunday attributed the turnaround to Ray and his unique experience as president and chairman of Enron during its bankruptcy. Ray worked nearly 6,000 hours on the FTX bankruptcy over the past two years and risked his reputation when he took-over the business from Sam Bankman-Fried, the company said.
If the bankruptcy went awry, Ray also faced the prospect of costly litigation, FTX said. Ray assumed the chief executive role despite knowing there was limited insurance for FTX directors and officers, the company added. The incentive award, devised by independent board members at the start of the bankruptcy, was intended “to account for the inherent risks and responsibilities of his role,” according to FTX.
FTX’s independent board members reviewed financial and legal analysis from law firm White & Case LLP and financial adviser Alvarez & Marsal to determine the appropriate amount of the incentive fee, according to court documents. The award was unanimously approved by the independent board following a December meeting and reviewed again by advisers liquidating FTX, Sunday’s filing said.
The case is FTX Trading Ltd., 22-11068, US Bankruptcy Court for the District of Delaware.
