💥Putting in Musk-ian Hours💥

A bomb drops in the Terraform cases, independent directors, JOANN, SolarEdge + More

The blatant, grifty-as-f*ck fee gouging that’s unfortunately become a staple of the bankruptcy industry has been grinding our gears for years.

🖕Is the Bankruptcy System F*cked?🖕

In at least one instance, however, comeuppance might be coming down the pike.

We covered the initial filing of Terraform Labs Pte. Ltd. and Terraform Labs Limited (collectively, the “debtors”) way back in January ‘24:

💥New Chapter 11 Bankruptcy Filing - Terraform Labs Pte. Ltd.💥

But we were derelict in our duties after that. Sorry, our bad — crypto, 🙄. As a quick refresher, the debtors were a sh*tty “stablecoin” scam (hence the dropped coverage) and, after dredging along in chapter 11 for half a year, confirmed a plan of liquidation in September ‘24. Thereafter, Todd Snyder of Piper Sandler ($PIPR) came on board as plan administrator.

During most of the debtors’ trip through 11 — from March 29, 2024 onward — Miami-based Genesis Credit Partners LLC (“GCP”) served as the financial advisor to the official committee of unsecured creditors (the “UCC”).

Source: GENCP.com

If you haven’t heard of ‘em, no surprise there. GCP is one of the newest shops on the block, founded in March ‘24 after a handful of folks, including Edward Kim, defected from Force Ten Partners LLC (“Force Ten”).* But they’ve had success pitching and winning a lot of engagements. Specifically, a none-too-shabby 9 in ‘24 after only existing for 3 of its quarters. That was enough to land the firm in a tie for the 11th spot on the ‘24 Octus Americas Restructuring Rankings for most company and creditor engagements.

On those same rankings, GCP found itself in the 8th overall spot on raw “fees per day” ($14,050), beating out the likes of Ernst & Young ($13,316), AlixPartners ($10,171), Huron Consulting ($7,043), and even their former colleagues at Force Ten ($6,281). To be 1,000% clear, there’s no per-capita element to that ranking system. That is, GCP, “a small advisory firm with fewer than 10 professionals,” billed more per day than those several-times-larger competitors.

Which brings us back to the debtors. On November 19, 2024, GCP filed its final fee application for its “work” in those cases. And as you might expect, Mr. Snyder and the US trustee (the “UST”) took a look at it to make sure all was in order. ⚡️Spoiler Alert⚡️ — it wasn’t. Instead, GCP’s $4mm+ ask “included hourly billing and expenses that seemed unreasonable and suspect on their face,” necessitating “further analysis.”

Mr. Snyder and the UST broke out their abacuses…

Source: GIPHY

… and crunched away on GCP’s time spent on a combination of 12 bankruptcies, including a few carried over from their Force Ten days.** The results ain’t pretty, and each filed an objection.*** Because they share common analysis, we’re going to focus on Mr. Snyder’s. Here are his Terraform-specific thoughts:

“[S]ix to eight Genesis timekeepers—essentially every single person in the firm—often billed to attend the weekly or biweekly Committee meetings…

Genesis similarly employed its all-hands-on-deck approach to internal calls and communication … In fact, filtering Genesis’s invoices for time associated with ‘discuss(ions),’ ‘call(s),’ ‘communication(s),’ ‘meet(ings),’ ‘review,’ ‘debrief,’ ‘conversations,’ and ‘follow-up’ with only the ‘GCP Team’ shows that Genesis billed an incredible $1,387,450.00 (2,139.3 hours) for these internal meetings…

Genesis routinely failed to assign the appropriate profession to tasks, resulting in partners and other premium billers performing low-level work. Of the $4,090,575 billed by Genesis timekeepers, only $332,190—8.1%—was billed for work performed by the three analysts on the team…

Genesis’s unreasonable, top-heavy approach is exemplified in its billing entries related to legal research—a task that does not seem appropriate for any of Genesis’s non-attorneys, especially when the Committee had retained sophisticated legal counsel for that precise purpose…

Genesis billed the Committee for time that it spent pitching itself to the Committee to become the Plan Administrator… Rather than advancing the Committee’s objectives, Genesis focused on creating polished presentations, crafting slide decks, and pitching materials aimed solely at positioning itself as the Plan Administrator. Considering that Genesis ultimately failed in its bid to be appointed as the Plan Administrator, it is impossible to understand why Genesis believes that its self-promotion should be compensated at the estate’s expense, draining assets meant to benefit creditors while providing no benefit.”

LOL, legal research??? What?!? They couldn’t trust the work of the UCC’s counsel, McDermott Will & Emery LLP, on that? They’ve got Darren Azman for heaven’s sake!!! You shouldn’t need us to tell you that a financial advisor’s performance of legal research is absurd on its face. It’s not their role. But in case there are any lingering doubts out there, the plan administrator also clarified that not a single person at GCP is an attorney, 😂. Don’t let a simple thing like a law license get in the way, guys!