Lack of cryptocurrency regulations have made the legal work on crypto bankruptcies more difficult and expensive, FTX lawyers said.
The legal industry has emerged as a major winner amid cryptocurrency collapses like FTX and Celsius, generating hundreds of millions of dollars for lawyers.
Lawyers, accountants, consultants, analysts and other professionals have collected at least $700 million in fees from the bankruptcies from major crypto firms over the past year, according to a report and an analysis by The New York Times.
The calculated amount includes the costs charged as part of crypto bankruptcy cases of five crypto firms such as FTX, Celsius Network, Voyager Digital, BlockFi and Genesis Global between July 5, 2022 and July 31, 2023. The figure is likely to grow significantly as the cases unfold in the near future, with Sam Bankman Fried’s trial coming in October.
According to the data, the legal experts involved in the FTX case are the biggest winners of cryptocurrency bankruptcies, charging a total of $326 million. The law firm Sullivan & Cromwell, which manages FTX’s bankruptcy, has reportedly charged over $110 million in legal fees, in addition to $500,000 in expenses.
Andrew Dietderich reportedly noted that the costs are particularly driven by lack of clear cryptocurrency regulations, which made the cases more complex and time-consuming.
Kirkland & Ellis — which handles Celsius, Genesis and Voyager bankruptcies — has billed $101 million for its work, with $2.5 million in expenses, the NYT analysts said. Alvarez & Marsal, a turnaround management firm, has reportedly charged more than $125 million for its work on FTX, Celsius and Genesis.
Some of the initial reports indicating that firms like Sullivan & Cromwell would reap a fortune from its crypto bankruptcy work surfaced in January 2023. The firm reportedly had more than 150 people working on the FTX case at the time, including 30 partners with rates exceeding $2,000 per hour.
Amid concerns over high legal fees, the United States bankruptcy court appointed Katherine Stadler as fee examiner for the FTX case. In June, Stadler reported that the team working on FTX had requested more than $200 million in fees since its November bankruptcy, stating that the fees were reasonable.
SBF’s legal team is continuing to fight against the U.S. Department of Justice, asking the court on Sept. 1 to deny all recent requests by the authority. As previously reported by Cointelegraph, one of the DOJ’s requests included an appeal to ban all SBF’s seven expert witnesses from testifying in court. Some of the witnesses could cost SBF up to $1,200 per hour to testify.