The Legal Industry Takes Home Big Winnings
In the wake of cryptocurrency collapses like FTX and Celsius, the legal industry has emerged as a major winner, raking in hundreds of millions of dollars in fees. Lawyers, accountants, consultants, analysts, and other professionals have collectively earned at least $700 million from the bankruptcies of major crypto firms over the past year, according to a report by The New York Times.
Calculating the Costs
The $700 million figure includes the costs charged in five crypto bankruptcy cases: FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global. These cases took place between July 2022 and July 2023. However, the total amount is expected to rise significantly as more cases unfold in the future. In October, Sam Bankman Fried's trial will begin, adding to the tally.
(Image: Fees charged in crypto bankruptcy cases)
The Biggest Winners: FTX Lawyers
According to the data, the lawyers involved in the FTX case have come out on top, collecting a whopping $326 million. The law firm Sullivan & Cromwell, which manages FTX's bankruptcy, is said to have charged over $110 million in legal fees, and an additional $500,000 in expenses.
Andrew Dietderich, an expert in the field, has noted that the complexities and time-consuming nature of these cases, exacerbated by the lack of clear cryptocurrency regulations, are major contributors to the high costs.
Other Major Players
Kirkland & Ellis, the firm handling the bankruptcies of Celsius, Genesis, and Voyager, has billed $101 million for its services, along with $2.5 million in expenses. Alvarez & Marsal, a turnaround management firm, charged more than $125 million for their work on FTX, Celsius, and Genesis.
Early Rumblings of Fortune
Initial reports surfaced in January 2023, suggesting that firms like Sullivan & Cromwell stood to make a fortune from crypto bankruptcy cases. At that time, the firm reportedly had over 150 people employed on the FTX case, including 30 partners with hourly rates exceeding $2,000.
Pushback Against High Fees
In response to concerns over the exorbitant legal fees, the United States bankruptcy court appointed Katherine Stadler as the fee examiner for the FTX case. In June, Stadler reported that the FTX team had requested more than $200 million in fees since the company's bankruptcy in November. Stadler deemed these fees to be reasonable.
Fighting Back
Meanwhile, SBF's (Sam Bankman Fried) legal team is actively fighting against the U.S. Department of Justice, urging the court to deny recent requests made by the authority. One of the DOJ's requests was to ban all seven of SBF's expert witnesses from testifying in court. Some of these witnesses could cost SBF up to $1,200 per hour to testify.
As these crypto bankruptcy cases continue to unfold, lawyers and legal professionals are cashing in, making millions of dollars in fees. The lack of regulatory clarity surrounding cryptocurrencies has made these cases more complex and time-consuming, driving up costs. While there are concerns about the high fees, some believe they are justified given the intricacies of the cases. Meanwhile, individuals like SBF are pushing back against the U.S. Department of Justice, refusing to back down in their fight.
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