Crypto Legal Windfall
The legal industry has undeniably found itself in a prosperous position amidst the tumultuous landscape of cryptocurrency collapses, exemplified by the unfortunate events surrounding FTX and Celsius. Lawyers, along with an array of professionals ranging from accountants to consultants and analysts, have collectively amassed a substantial fortune, exceeding a staggering $700 million, through their involvement in the insolvency proceedings of major cryptocurrency entities. This information comes to light through a comprehensive report and meticulous analysis meticulously conducted by The New York Times.
This significant sum takes into account the various expenses incurred throughout the intricate bankruptcy processes of five notable cryptocurrency firms: FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global. The timeframe for these proceedings spans from July 5, 2022, to July 31, 2023. Forecasts suggest that this figure is poised to witness considerable growth in the foreseeable future, particularly as these cases continue to evolve, with the trial of Sam Bankman Fried scheduled for October.
The data at our disposal underscores that the legal experts involved in the FTX case have emerged as the primary beneficiaries in the realm of cryptocurrency insolvencies, accruing an astounding total of $326 million in fees. Notably, the esteemed law firm Sullivan & Cromwell, entrusted with the intricate task of managing FTX's bankruptcy, has purportedly invoiced in excess of $110 million for their legal services, coupled with an additional $500,000 in miscellaneous expenses.
Remarkably, it has been observed that these heightened costs are predominantly attributable to the inherent complexity and protracted nature of these cases, exacerbated by the dearth of well-defined cryptocurrency regulations.
Kirkland & Ellis, the esteemed legal entity responsible for overseeing the bankruptcies of Celsius, Genesis, and Voyager, has submitted invoices amounting to a noteworthy $101 million for their diligent efforts, supplemented by $2.5 million in associated expenses, as meticulously reported by analysts at The New York Times. Not to be overlooked, Alvarez & Marsal, a distinguished firm specializing in restructuring and turnaround management, has purportedly invoiced in excess of $125 million for their pivotal role in the FTX, Celsius, and Genesis cases.
Initial reports, signaling substantial financial gains for entities such as Sullivan & Cromwell arising from their involvement in cryptocurrency bankruptcy matters, surfaced as early as January 2023. At that juncture, it was revealed that the firm had deployed an impressive workforce of over 150 individuals dedicated to the FTX case, which notably included 30 partners commanding hourly rates that surpassed the formidable threshold of $2,000 per hour.
In response to mounting concerns over the burgeoning legal fees associated with these proceedings, the United States bankruptcy court exercised prudence by appointing Katherine Stadler as the fee examiner for the FTX case. In a report issued in June, Stadler substantiated that the team handling the FTX case had indeed petitioned for fees exceeding $200 million since the commencement of the November bankruptcy, an assertion firmly grounded in the belief that these fees were eminently justifiable.
It is worth noting that Sam "SBF" Bankman-Fried's legal team persists in their vigorous efforts to contest the United States Department of Justice, imploring the court, as of September 1, to reject the recent requests advanced by the said authority. As previously disclosed, one of the DOJ's requests sought to bar all seven of SBF's expert witnesses from providing testimony in court, a move that could potentially impose a substantial financial burden on SBF, with the prospective cost of these witnesses' testimony soaring to an astonishing $1,200 per hour.