Lawyers Reap Hundreds of Millions from Crypto Crashes

In the wake of cryptocurrency collapses such as FTX and Celsius, the legal industry has emerged as a significant winner, generating hundreds of millions of dollars for attorneys.

According to a report and analysis by The New York Times, lawyers, accountants, consultants, analysts, and other professionals collected at least $700 million in fees from the bankruptcies of prominent crypto firms over the past year.

The calculated amount comprises the expenses incurred in connection with the crypto bankruptcy proceedings of five crypto firms FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global between July 5, 2022, and July 31, 2023.

The fees charged in crypto bankruptcy cases. Source: The New York Times

Sam Bankman Fried’s trial is scheduled to begin in October, so the number is likely to increase significantly as the cases progress. According to the data, the legal specialists involved in the FTX case are the largest beneficiaries of cryptocurrency bankruptcies, receiving $326 million in total fees.

According to reports, the law firm Sullivan & Cromwell, which is handling FTX’s bankruptcy, has charged over $110 million in legal fees and $500,000 in economics.

According to Andrew Dietderich, the dearth of clear cryptocurrency regulations makes the cases more complex and time-consuming, which drives up the costs.

Analysts at The New York Times reported that Kirkland & Ellis, which manages the Celsius, Genesis, and Voyager bankruptcies, has billed $101 million for its services and incurred $2.5 million in expenses.

According to reports, Alvarez & Marsal, a turnaround management firm, has billed more than $125 million for its work on FTX, Celsius, and Genesis. In January 2023, initial reports indicating that firms like Sullivan & Cromwell would make a fortune from their crypto bankruptcy work emerged.

According to reports, the firm had more than 150 individuals working on the FTX case at the time, including 30 partners with hourly rates exceeding $2,000 per hour. The United States Bankruptcy Court appointed Katherine Stadler as the fee examiner for the FTX case out of concern for excessive legal fees.

Stadler reported in June that the FTX team had requested more than $200 million in fees since the bankruptcy filing in November, stating that the fees were reasonable.

Sam “SBF” Bankman-Fried’s legal team continues to battle the United States Department of Justice, requesting on September 1 that the court deny all recent requests by the agency.

As was previously reported, one of the DOJ’s requests included an appeal to prevent all seven expert witnesses for SBF from testifying in court. Some of the witnesses’ testimony could cost SBF up to $1,200 per hour.