Prominent law firms Sullivan and Cromwell and Kirkland and Ellis have accumulated fees exceeding $700 million from noteworthy cryptocurrency bankruptcy cases.
Sam Bankman-Fried’s FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital are notable entities that have declared bankruptcy in recent years.
These high-profile bankruptcy cases have become a lucrative opportunity for Sullivan & Cromwell and Kirkland & Ellis, two prominent law firms involved in the legal proceedings.
FTX Attorneys, Advisors Get $700 million
The most likely victor is Sullivan & Cromwell, which is presently handling the case concerning FTX Trading Ltd., Sam Bankman-Fried’s exchange. A surge in customer withdrawals exposed a $8 billion deficit in FTX’s accounts, prompting the Bahamas-based cryptocurrency exchange to declare insolvency in November 2022.
Reports indicate that FTX’s bankruptcy has generated legal and advisory fees exceeding $500 million, escalating overall expenses. The bankruptcy administrators have demanded $700 million in fees and costs. Although specific requests have undergone a 20% reduction, others are still pending approval.
The special counsel for the FTX estate, Sullivan and Cromwell, has been granted authorization for $254 million in fees, as per court documents, in contrast to the $360 million in invoices. Alvarez and Marsel, financial advisers, subsequently receive $133 million in approved fees.
In addition to AlixPartners, Quinn Emanuel Urquhart and Sullivan, Perella Weinberg Partners, and Landis Rath and Cobb, additional firms and advisors have incurred a combined expenditure of $57 million.
At $1,300 per hour, FTX CEO John Ray III has billed $5.6 million, whereas the estate’s chief officers, RLKS Executive Solutions, have billed $26 million.
In contrast, the expenses and fees incurred by the Official Committee of Unsecured Creditors amount to $1.5 million and $81 million, respectively. In contrast, the fees requested by the Ad Hoc Committee are below $5 million.
$120 million in legal fees for Celsius, Voyager, and BlockFi
Since its role as primary counsel for three major cryptocurrency exchanges that filed for Chapter 11 during the peak of cryptocurrency losses in 2022, Kirkland and Ellis have likely earned more than $120 million, according to a Bloomberg report.
Kirkland and Ellis submitted its final fee application for three bankruptcy cases in January. The firm requested $76 million for the Celsius case, which is considerably more than the $27 million and $16 million earned from the Voyager and BlockFi cases.
The firm has accumulated fees amounting to $120 million across all three cases, with the Celsius case constituting the preponderance of that sum.
December 2022 saw the bankruptcy filing of Celsius, which followed the demise of TerraUSD and its digital currency, Luna. In July 2022, Voyager Digital initiated the bankruptcy process after the filing of the hedge fund Three Arrows Capital. In November 2022, after FTX, BlockFi obtained a $400 million credit line from which the latter initiated the bankruptcy process.
According to data from the Thomson Reuters Institute, the demand for bankruptcy practices increased by 4.4% annually in 2023, the highest increase of any practice category; litigation followed with a 3.2% increase.
