Major Law Firms Reap Substantial Fees from High-Profile Crypto Bankruptcies

The legal proceedings surrounding several high-profile cryptocurrency bankruptcies have generated over $700 million in fees for lawyers and advisers, turning these cases into significant revenue sources for involved law firms such as Sullivan & Cromwell and Kirkland & Ellis.

The bankruptcies of major cryptocurrency firms including FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital have been particularly profitable for these law firms.

FTX Legal Proceedings Garner $700 Million in Fees

In the ongoing bankruptcy of FTX Trading Ltd, initiated after an $8 billion shortfall was discovered due to unexpected customer withdrawals, legal and advisory fees have skyrocketed. Sullivan & Cromwell, handling the FTX case, is set to receive the largest share of these fees. To date, the bankruptcy process has racked up over $500 million in legal and advisory costs, with total requested fees and expenses reaching $700 million. Some fee requests have been trimmed by 20%, while others are still pending approval.

Court documents reveal that Sullivan & Cromwell, acting as special counsel for the FTX estate, has been granted $254 million in fees from an initial billing of $360 million. Financial advisors Alvarez and Marsel have also secured $133 million in approved fees. Additional costs from firms including AlixPartners, Quinn Emanuel Urquhart & Sullivan, Perella Weinberg Partners, and Landis Rath & Cobb total approximately $57 million.

FTX CEO John Ray III has billed $5.6 million at an hourly rate of $1,300, while RLKS Executive Solutions, responsible for the estate’s chief officers, has charged $26 million.

Moreover, the Official Committee of Unsecured Creditors and the Ad Hoc Committee of Creditors have reported expenses of $81 million and $1.5 million, and under $5 million in fees, respectively.

Kirkland & Ellis Earns $120 Million for Handling Three Crypto Bankruptcies

Kirkland & Ellis, serving as lead counsel for three major crypto bankruptcies during 2022’s crypto downturn, has reportedly earned upwards of $120 million. Their final fee applications submitted in January detailed $76 million for the Celsius case and smaller amounts for Voyager and BlockFi, totaling $27 million and $16 million, respectively.

Celsius entered bankruptcy following the TerraUSD and Luna collapse, while Voyager Digital and BlockFi filed for bankruptcy following the downfall of Three Arrows Capital and FTX, respectively.

The surge in demand for bankruptcy legal services reflects a broader trend, as noted by the Thomson Reuters Institute, which reported a 4.4% year-over-year growth in bankruptcy practices in 2023, the highest among all legal practices, followed by litigation at 3.2% growth.