The legal industry has greatly benefited from the collapse of cryptocurrency firms like FTX and Celsius, raking in hundreds of millions of dollars in fees. According to a report by The New York Times, lawyers, accountants, consultants, analysts, and other professionals have collected at least $700 million in fees from the bankruptcies of major crypto firms in the past year.
The $700 million figure includes the costs charged as part of the crypto bankruptcy cases of five firms: FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global. This amount was accumulated between July 5, 2022, and July 31, 2023. As the cases continue to unfold, the total fees are expected to increase significantly, especially with the upcoming trial of Sam Bankman Fried in October.
Among the cryptocurrency bankruptcies, the FTX case has generated the highest fees for legal experts, totaling $326 million. The law firm Sullivan & Cromwell, which is managing FTX’s bankruptcy, has reportedly charged over $110 million in legal fees, along with $500,000 in expenses.
The complexity and time-consuming nature of these cases, largely due to the lack of clear cryptocurrency regulations, have contributed to the high costs. Kirkland & Ellis, the firm handling the bankruptcies of Celsius, Genesis, and Voyager, has billed $101 million for its work, with $2.5 million in expenses. Alvarez & Marsal, a turnaround management firm, has charged more than $125 million for its services in the FTX, Celsius, and Genesis cases.
Reports forecasting the substantial earnings of firms like Sullivan & Cromwell from their crypto bankruptcy work first came to light in January 2023. At that time, the firm had more than 150 people working on the FTX case, including 30 partners who were charging rates exceeding $2,000 per hour.
In response to concerns over the escalating legal fees, the United States bankruptcy court appointed Katherine Stadler as a fee examiner for the FTX case. Stadler reported in June that the team working on FTX had requested over $200 million in fees since the November bankruptcy filing, and she deemed these fees as reasonable.
Meanwhile, Sam Bankman-Fried’s legal team continues to contest the United States Department of Justice. On September 1, they urged the court to deny all recent requests made by the authorities, including the appeal to ban all seven expert witnesses from testifying. Some of these witnesses could cost Bankman-Fried up to $1,200 per hour to testify.
The impact of crypto firm bankruptcies on the legal industry highlights the lucrative nature of the cryptocurrency space and the complexities that arise when such companies face financial troubles. As regulations in the crypto industry evolve, legal professionals will likely continue to play a crucial role in navigating the legal intricacies and protecting the interests of all parties involved.
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