Lawyers in the cryptocurrency industry have raked in over $820 million in fees from high-profile bankruptcy cases during the 2022 crypto winter. The financial struggles of major companies like FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital have provided lucrative opportunities for legal firms and advisors involved in handling these cases.
One of the standout cases is the bankruptcy of FTX, once the second-largest crypto trading platform in the world. The Bahamas-based exchange faced a liquidity crunch and revealed an $8 billion shortfall in its accounts, leading to its declaration of bankruptcy in November 2022. Sullivan & Cromwell, serving as special counsel for the FTX estate, has seen their fees soar from $500 million to over $700 million, with the firm alone billing the company $254 million.
Another legal firm benefiting from the crypto industry’s downturn is Kirkland & Ellis, which serves as lead counsel for companies like Celsius, Voyager Digital, and BlockFi that have sought Chapter 11 bankruptcy protection. Celsius, for example, suspended deposits and withdrawals on its platform in June due to unfavorable market conditions, leading to its bankruptcy filing. Kirkland & Ellis netted $76 million for the Celsius case alone and filed a final fee application of over $120 million for all the cases combined.
Despite the substantial fees earned by lawyers in these bankruptcy cases, the demand for bankruptcy legal services within the crypto industry continues to grow. Data from the Thomson Reuters Institute shows a 4.4% year-over-year increase in the need for bankruptcy lawyers in the crypto economy, indicating a rising trend in the sector. The crypto industry has shown the highest demand for bankruptcy-related legal assistance compared to other financial sectors globally.
Overall, the 2022 crypto winter has proven to be a boon for lawyers and advisors handling high-profile bankruptcy cases in the cryptocurrency industry, with firms like Sullivan & Cromwell and Kirkland & Ellis collectively earning over $820 million in fees. As the industry continues to evolve and face challenges, the demand for legal expertise in navigating bankruptcy proceedings is expected to remain high.