The legal industry has made significant gains from bankruptcies of leading companies in the crypto sector, such as FTX and Celsius, with lawyers earning hundreds of millions of dollars from these bankruptcy cases. An increase in such cases is expected in the industry, and concerns about high legal fees persist. The US bankruptcy court appointed an auditor to assess the fees and confirmed that they were reasonable. Bankman-Fried’s legal team is still fighting in court with the Department of Justice.
Lack of Regulation Increases Expenses
According to a report and analysis prepared by The New York Times, lawyers, accountants, consultants, analysts, and other professionals collected at least $700 million in service fees from the bankruptcies of major crypto firms last year. The calculated amount includes expenses collected as part of the bankruptcy cases of five crypto firms, namely FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global, between July 5, 2022, and July 31, 2023.
With Sam Bankman Fried’s trial scheduled for October, it is expected that this figure will significantly increase as more cases are filed in the near future. According to the data, legal experts involved in the FTX case received a total of $326 million in fees, making them the biggest winners in this case. Sullivan & Cromwell, the law firm handling FTX’s bankruptcy, reportedly requested legal fees of over $110 million in addition to $500,000 in expenses. Andrew Dietderich stated that the lack of clear crypto sector regulations, which makes the cases more complex and time-consuming, is the main reason for the high costs.
FTX Case Yields the Biggest Profit
Analysts from The New York Times stated that Kirkland & Ellis charged $101 million and incurred expenses of $2.5 million for their work related to the bankruptcies of Celsius, Genesis, and Voyager. Alvarez & Marsal, a turnaround management firm, reportedly received over $125 million for their work on FTX, Celsius, and Genesis. Some of the initial reports indicating that firms like Sullivan & Cromwell would make a fortune from bankruptcy cases emerged in January 2023. The firm was reported to have over 150 employees working on the FTX case at that time, including 30 partners earning hourly rates exceeding $2,000.
Amid concerns about high legal fees, the US bankruptcy court appointed Katherine Stadler as the fee examiner for the FTX case. In June, Stadler reported that the team working on FTX had requested over $200 million in fees since the bankruptcy in November, and she confirmed that the fees were reasonable. Sam Bankman-Fried’s legal team continues to fight against the US Department of Justice, requesting the court to reject all of the authority’s recent demands on September 1. One of the Department of Justice’s requests included an application to ban seven expert witnesses from testifying in court on behalf of SBF. The testimony of some of these witnesses could cost SBF up to $1,200 per hour.
