The legal sector has capitalized on the downfall of cryptocurrency giants like FTX and Celsius, reaping substantial gains totaling hundreds of millions of dollars in fees.
Professionals such as lawyers, accountants, consultants, and analysts have collectively earned at least $700 million through their involvement in the bankruptcy proceedings of prominent crypto companies over the past year.
This lucrative trend is detailed in a report by The New York Times, which analyzed the financial outcomes of the crypto bankruptcies.
The sum encompasses expenses incurred during the resolution of five major crypto firms’ bankruptcy cases: FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global.
This assessment covers the period from July 5, 2022, to July 31, 2023, with an expectation of further escalation as pending cases unfold, including the impending trial of Sam Bankman Fried scheduled for October.
The most substantial beneficiaries in the realm of cryptocurrency bankruptcy are the legal experts tied to the FTX case, amassing a significant sum of $326 million. Notably, the law firm Sullivan & Cromwell, overseeing FTX’s bankruptcy, has been at the forefront, charging a remarkable $110 million in legal fees and an additional $500,000 in expenses.
The complex nature of cryptocurrency regulations, or the lack thereof, has played a pivotal role in driving up costs.
Andrew Dietderich acknowledged that the intricacies of crypto regulations have led to a protracted and multifaceted legal landscape, contributing to higher fees.
Kirkland & Ellis, entrusted with handling bankruptcies for Celsius, Genesis, and Voyager, have accounted for $101 million in billed fees and $2.5 million in expenses.
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Additionally, Alvarez & Marsal, specializing in turnaround management, has reportedly invoiced over $125 million for their involvement in FTX, Celsius, and Genesis cases.
Initial reports in January 2023 indicated the substantial financial gains anticipated for firms like Sullivan & Cromwell engaged in crypto bankruptcy proceedings.
The firm allocated an extensive workforce of over 150 professionals to the FTX case, including 30 partners charging rates surpassing $2,000 per hour.
Acknowledging concerns over exorbitant legal fees, Katherine Stadler was appointed by the United States bankruptcy court to oversee fee examination for the FTX case.
In June, Stadler confirmed that the fees requested by the FTX team, which exceeded $200 million since the November bankruptcy, were justifiable.
Continuing the legal saga, Sam “SBF” Bankman-Fried’s legal team is actively opposing the United States Department of Justice, seeking to counter recent requests by the authority.
These requests encompass an appeal to exclude all seven of SBF’s expert witnesses from testifying in court, a move that could potentially cost up to $1,200 per hour for these witnesses.
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