Law Firms Garner $700M in Fees from High-Profile Cryptocurrency Bankruptcies
Summary:
Specializing law firms have accumulated over $700 million in fees from notable cryptocurrency bankruptcy cases. These cases include FTX Trading Ltd and Genesis Global Capital, among others, and have proven profitable for Sullivan & Cromwell and Kirkland & Ellis. The former is set to be the major beneficiary, managing FTX's case that revealed an $8 billion deficit leading to bankruptcy. Their approved fees, along with multiple others, amount to a colossal sum. Furthermore, Kirkland and Ellis have potentially earned over $120 million for representing three major crypto exchanges that filed for bankruptcy at the peak of crypto losses in 2022.
In recent sizeable cryptocurrency bankruptcy cases, law firms specializing in this area have raked in more than $700 million in fees. High-profile bankruptcy suits involving FTX Trading Ltd, led by Sam Bankman-Fried, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital, have turned into a lucrative source of income for two significant law firms handling these cases: Kirkland & Ellis and Sullivan & Cromwell.
Sullivan & Cromwell, dealing with the FTX Trading Ltd's case, seems set to make the most gain. The Bahama-based crypto exchange, headed by Sam Bankman-Fried, declared insolvency in November 2022 following an $8 billion shortfall in customer accounts due to a huge increase in withdrawals.
The insolvency of FTX has resulted in more than $500 million in fees for its legal advisory team, and total costs are still climbing. Application for an impressive $700 million in fees and expenses has been presented by those administering the bankruptcy process. Some of these proposals have received a 20% cut, while the approval of others is pending.
Court documents show that Sullivan and Cromwell, the special advisers for the FTX estate, have received acceptance for a $254 million fee, even though they invoiced $360 million. Financial consultants Alvarez and Marsal come next with an approved $133 million in fees. An accumulation of charges totaling $57 million has come from other firms including AlixPartners, Quinn Emanuel Urquhart and Sullivan, Perella Weinberg Partners, and Landis Rath and Cobb. FTX's CEO, John Ray III, has charged $5.6 million hourly at $1,300, while RLKS Executive Solutions, the estate's main officers, have invoiced $26 million. Also, the Official Committee of Unsecured Creditors has generated $81 million in fees and $1.5 million in expenses, with the Ad Hoc Committee claiming less than $5 million.
According to a report from Bloomberg, Kirkland and Ellis have likely accrued over $120 million as the leading counsel in three major crypto exchanges that filed for Chapter 11 during the height of crypto losses in 2022. This January, the firm submitted its final payment claim for the three insolvency cases: $76 million for the Celsius case, and the Voyager and BlockFi suits bringing in $27 million and $16 million, respectively.
The total fees for these three cases from Kirkland and Ellis come to $120 million, with the Celsius situation accounting for the bulk of this amount. The bankruptcy of Celsius was declared in July 2022 after the collapse of TerraUSD and Luna, their digital currency. In July 2022, Voyager Digital filed for bankruptcy after the hedge fund, Three Arrows Capital, declared insolvency. BlockFi followed suit in November 2022, after FTX to whom it had a $400 million credit line also became insolvent.
As per data from the Thomson Reuters, a rise of 4.4% in demand for bankruptcy practices was recorded in 2023, more than any other field, with litigation posting a 3.2% increase.
Published At
5/31/2024 12:53:10 PM
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