In recent years, high-profile bankruptcies in the crypto world have led to a rapid increase in legal fees, creating a goldmine for major law firms. Firms like Sullivan & Cromwell and Kirkland & Ellis have collectively earned over $700 million from these large cases. This rise in legal costs has become a significant issue with the emergence of extensive financial inconsistencies and mismanagement in the crypto industry.
Bankruptcies Create a Goldmine for Law Firms
At the center of this trend are the collapses of major crypto organizations like FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital. These bankruptcies highlight the inherent volatility and risks of the crypto market while also revealing the enormous legal and administrative costs involved in resolving such complex financial structures. Sullivan & Cromwell, in particular, has been at the forefront by managing the legal intricacies of the high-profile FTX bankruptcy.
The bankruptcy process initiated in November 2022, following the revelation of FTX’s dramatic $8 billion shortfall, became a significant revenue source for Sullivan & Cromwell. The firm’s legal fees, along with those of other consultants, contributed to a total cost exceeding $500 million, with total fee claims surpassing $700 million.
Although some fee claims have been reduced by up to 20%, the financial burden remains substantial. For example, Sullivan & Cromwell had $254 million of its $360 million bill approved, while financial advisors Alvarez and Marsel earned $133 million in legal fees.
Other Firms Involved in the FTX Case
Other firms involved in the FTX case include AlixPartners, Quinn Emanuel Urquhart and Sullivan, Perella Weinberg Partners, and Landis Rath and Cobb, collectively claiming $57 million in fees. Additionally, FTX CEO John Ray III and RLKS Executive Solutions have billed significant amounts, with Ray charging $1,300 per hour for a total of $5.6 million, and RLKS billing $26 million.
The Official Committee of Unsecured Creditors has also incurred $81 million in fees and $1.5 million in expenses, while the Ad Hoc Committee’s fees remained under $5 million. Another major player in crypto bankruptcies, Kirkland & Ellis, earned over $120 million for their roles in the Celsius, Voyager Digital, and BlockFi cases. These cases, all of which filed for Chapter 11 during the crypto market downturn in 2022, brought significant fees to the firm. The Celsius bankruptcy, resulting from the collapse of TerraUSD and Luna, alone accounted for $76 million in fees, while Voyager and BlockFi added $27 million and $16 million in fees, respectively.
