Lawyers Fees Over $820M in High-Profile Bankruptcy Cases

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As a seasoned crypto investor who has weathered through several market cycles and witnessed the rise and fall of various players in the industry, I can’t help but feel a mix of emotions reading about the significant financial wins for lawyers handling bankrupt crypto companies. On one hand, it’s disheartening to see once-promising projects crumble under the weight of market pressures, leaving investors and employees in the lurch. On the other hand, I can’t help but admire the skill and expertise these legal firms have demonstrated in navigating complex bankruptcy proceedings for their clients.

As an industry analyst, I’ve observed that the 2022 crypto winter resulted in several prominent crypto companies facing financial difficulties, ultimately leading to their bankruptcy filings. This trend created lucrative opportunities for legal firms handling these high-profile cases. Notably, firms like Sullivan & Cromwell and Kirkland & Ellis have collectively earned approximately $820 million in fees from representing these distressed companies.

Big Wins for Lawyers Handling FTX Bankruptcy

Among the legal teams involved in the FTX cases, Sullivan & Cromwell, acting as special counsel for the FTX estate, has reaped the greatest advantages.

As a seasoned market analyst, I’d put it this way: I’ve closely monitored the crypto trading landscape, and at one point, FTX, founded by Sam Bankman-Fried (SBF), ranked as the second-largest platform in terms of trading volume, just behind Binance.

As a researcher studying the events surrounding the Bahamas-based cryptocurrency exchange, I encountered a significant challenge when the platform experienced a momentary shortage of liquidity after news broke about an $8 billion discrepancy in their financial records.

As a crypto investor, I received unfortunate news in November 2022 when the exchange I used filed for bankruptcy protection. They made this declaration in a US court, affecting all their affiliated companies.

Based on available information, FTX’s legal team, which includes Sullivan & Cromwell, has witnessed a significant increase in their invoiced fees, rising from approximately $500 million to over $700 million. Sullivan & Cromwell specifically charged the company $254 million for their services. At first, they requested $360 million, but this amount was subsequently contested.

As a crypto investor, I’ve noticed that other reputable legal firms, like Alvarez and Marsal, have also reaped significant rewards from their involvement in the industry. However, there are still a few unapproved bills that need to go through the courts before the final amounts can be confirmed.

Kirkland & Ellis: Counsel for Major Crypto Companies

Kirkland & Ellis, another law firm, has gained prominence by representing various major crypto firms that sought Chapter 11 bankruptcy protection in the turbulent market of 2022. Among these companies are Celsius, Voyager Digital, and BlockFi.

As a researcher studying the financial situation of Celsius, I’ve discovered that they encountered significant financial difficulties, leading them to halt deposits and withdrawals on their platform in June. They attributed this decision to adverse market conditions.

The platform, which promises high-yield returns on customer deposits, subsequently filed for bankruptcy, allowing Kirkland & Ellis to step in and assist with the reorganization. The legal firm netted a total of $76 million for the Celsius case alone. The firm filed a final fee application of over $120 million for all the cases combined.  However, Celsius officially exited bankruptcy in February this year and has repaid $3 billion to investors.

Increasing Demand for Bankruptcy Lawyers in the Crypto Economy

In contrast to the rising costs of hiring bankruptcy lawyers due to an influx of related cases in 2022, the crypto economy has experienced a substantial upsurge in the requirement for such professionals. According to statistics from Thomson Reuters Institute, there was a 4.4% yearly expansion in the demand for bankruptcy legal services within this sector.

As a seasoned analyst, I’ve observed a striking trend in the global financial landscape: the crypto sector has experienced unprecedented interest in bankruptcy-related legal counsel more than any other sector.

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2024-05-31 16:07