John J. Ray, Chief Executive Officer of FTX Cryptocurrency Derivatives Exchange, arrives at a House Financial Services Committee hearing investigating the collapse of FTX in Washington, DC on Tuesday, December 13, 2022.
Al Drago | Bloomberg | Getty Images
FTX CEO John J. Ray draws on a team he’s known over the years handling bankruptcy restructurings, and the company pays them millions for the work they do to clear FTX’s tangled morass of accounts and shoddy records to unpack.
Ray and his top team are not typical employees who work directly for the company. Instead, the new management team, like bankers and lawyers working on the bankruptcy proceedings, is made up of professional independent contractors. This means, among other things, that they are paid immediately before FTX investors are compensated for their losses.
According to court documents, FTX’s new CEO will be charged $1,300 an hour plus “reasonable expenses” for his work to unravel what US Attorney Damian Williams called “one of the largest fraud cases in American history” in a news conference Tuesday. designated. That’s $2.6 million annualized, assuming Ray works a standard 40-hour workweek for 50 weeks a year, allowing for two weeks of unpaid vacation.
In a bankruptcy case Ray was working on, he billed about 156 hours over a two-month period, which netted him $120,582, so his bills for FTX may be higher or lower.
For comparison, when Ray guided Enron through his own fraud collection process in 2005 and steered the energy company through part of its bankruptcy as chairman and CEO, he raised a more modest $1.2 million on an annual basis.
Ray also has a close-knit team that has worked with him on at least three bankruptcies over the past three decades, including the restructuring of Enron in the early 2000s, Nortel in 2009, and Overseas Shipholding Group in 2014.
These bankruptcy weapons for hire are:
- Kathryn Schultea, Chief Administrative Officer who has worked with Ray since Enron. She is also President and CEO of RLKS and worked at Enron and subsequent bankruptcy companies from 1999 to 2014 before joining Ray in 2008 as Chief Administrative Officer.
- Mary Cilia, Chief Financial Officer
- Raj Perubhatla, Chief Information Officer
LKS charges $975 per hour per person, or $5.85 million on an annual basis, for these other three executives, who are hired through RLKS Executive Solutions, a company that specializes in hiring bankruptcy trustees. RLKS executives oversee the administrative, financial, and information technology efforts: a critical part of the reconstruction of what Ray has described as a “complete failure of corporate controls at every level.”
The total for all four officers is then $4,225 per hour or $8.45 million annualized.
FTX has recovered about $1 billion worth of assets so far, but creditors could take months or years to complete. Enron’s restructuring dragged on for more than a decade. Nortel’s lawsuits are still ongoing in 2022, more than 11 years later.
Correction: Ray has a team that worked with him on the Overseas Shipholding Group restructuring in 2014. In an earlier version, the company name was incorrectly specified.