Despite the surge in legal fees from cryptocurrency bankruptcy cases filed in 2022, the demand for bankruptcy lawyers in the crypto economy has grown significantly.
The 2022 crypto winter led several prominent companies in the industry to declare bankruptcy, making lawyers and other advisors handling these high-profile cases very wealthy.
The financial woes of major companies like FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital presented significant opportunities for the legal firms involved. So far, companies such as Sullivan & Cromwell and Kirkland & Ellis have collectively earned a total of $820 million in fees.
Big Wins for Lawyers Handling FTX Bankruptcy
Sullivan & Cromwell, serving as special counsel for the FTX estate, has benefitted the most from these cases.
FTX, established by Sam Bankman-Fried (SBF), was once the second-largest crypto trading platform in the world after Binance.
However, trouble began when the Bahamas-based exchange suffered a brief liquidity crunch following revelations of an $8 billion shortfall in its accounts.
The exchange officially declared bankruptcy in November 2022, filing for Chapter 11 protection in a United States court for all its affiliates.
According to reports, the legal team working with FTX has seen their legal and advisory fees soar from $500 million to over $700 million. Sullivan & Cromwell alone billed the company $254 million in fees. Initially, the firm demanded $360 million, but that bill was rejected.
Other legal firms involved, such as financial advisers Alvarez and Marsel, have also netted substantial amounts, though some bills are still awaiting court approval.
Kirkland & Ellis: Counsel for Major Crypto Companies
Another legal firm that has benefited from the downfall of these companies is Kirkland & Ellis. The firm serves as lead counsel for several of the companies that sought Chapter 11 bankruptcy protection . These companies include Celsius, Voyager Digital, and BlockFi.
Celsius, for instance, faced financial troubles when it suspended deposits and withdrawals on the platform in June, citing unfavorable market conditions.
The platform, which promises high-yield returns on customer deposits, subsequently filed for bankruptcy, allowing Kirkland & Ellis to step in and assist with the reorganization. The legal firm netted a total of $76 million for the Celsius case alone. The firm filed a final fee application of over $120 million for all the cases combined. However, Celsius officially exited bankruptcy in February this year and has repaid $3 billion to investors.
Increasing Demand for Bankruptcy Lawyers in the Crypto Economy
Despite the surge in legal fees from cryptocurrency bankruptcy cases filed in 2022, the demand for bankruptcy lawyers in the crypto economy has grown significantly. Data from the Thomson Reuters Institute shows a 4.4% year-over-year increase in the need for bankruptcy legal services within the crypto industry.
Remarkably, the crypto sector has seen the highest demand for bankruptcy-related legal assistance compared to other financial sectors worldwide.
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