Law firms handling the most high-profile cases, such as the seven Chapter 11 crypto bankruptcies from 2022, charged and received $751 million in legal fees. In addition, four law firms, Kirkland and Ellis, White & Case, Sullivan & Cromwell, and Cleary Gottlieb, accounted for 64% of the fees and went home with $484 million for their work on several crypto bankruptcy cases.
Crypto Bankruptcy Cases and High Cost of Legal Services
Legal firms that have handled prominent cryptocurrency bankruptcy cases have made substantial profits from their caseloads. Sullivan & Cromwell, which received large fees for serving as the debtor’s counsel to the insolvent cryptocurrency exchange FTX, is among the most well-known examples.
Accordingly, the company has amassed an impressive $215 million in total. At first, Sullivan & Cromwell’s monthly fees exceeded $10 million. However, the company decided to cut its fees to $7 million a month in February.
The complexity and rigor of the legal proceedings surrounding FTX’s bankruptcy were reflected in the law firm’s earnings, which remained noteworthy despite the reduction. Kirkland & Ellis is another legal firm that obtained significant compensation from cryptocurrency bankruptcies.
The firm collected a total of $120 million from its work on several bankruptcy cases involving cryptocurrencies. Lead debtor’s counsel for a number of well-known companies, including Voyager, BlockFi, and Celsius, was Kirkland & Ellis.
The Celsius case, which generated over $75 million in earnings for the firm alone, was the most profitable of all of these cases.
Other Beneficiaries
Although Sullivan & Cromwell and Kirkland & Ellis are the highest-paid law firms, other legal entities have also received sizable payments for their work in the cryptocurrency sector. White & Case, for example, received about $75 million for its services handling significant cases involving Genesis and Celsius.
The firm gained more notoriety due to its legal services for Celsius creditors and its support in the investigation of Alex Mashinsky, the firm’s former CEO. Furthermore, Cleary Gottlieb is another company that has reaped large fees from cryptocurrency bankruptcy cases.
Serving as Genesis’ lead attorney during its bankruptcy, the company earned close to $73 million for its services. Gottlieb has been receiving about $2.5 million a month since the case started.
Ongoing Crypto Bankruptcy Proceedings
While some bankruptcy cases have been resolved, others are still pending. The FTX bankruptcy case is one of the most well-known and has received a lot of media attention.
October marks the confirmation hearing for FTX, which could mean the end of this protracted legal dispute. Another ongoing case involves Terraform Labs, which was forced into bankruptcy after its algorithmic stablecoin, TerraUSD, crashed. The reorganization hearing for Terraform Labs is scheduled for September 19.
Former FTX Executive Withdraws Petition
Apart from the current bankruptcy proceedings, significant attention has been paid to legal concerns involving former executives of defunct cryptocurrency companies. Ryan Salame, a former executive at the now-defunct cryptocurrency exchange FTX, is one such person.
Salame first attempted to have his guilty plea to charges of violating laws pertaining to money transfers and campaign finance revoked. However, his attorneys have notified the Southern District of New York United States District Court that they had withdrawn that request.
Salame’s legal troubles stem from his managing political contributions for Sam Bankman-Fried, the founder of FTX, which included sending money to many Republican candidates, including his partner, Michelle Bond.
Beginning in 2023, the probe into Salame and Bond concentrated on the loans Salame gave to Bond and the money she used to finance her congressional campaign. Thus, authorities carried out a search warrant at the couple’s Maryland estate as part of the investigation.
Salame was given a 90-month prison sentence, but because of health issues, that sentence was postponed. It is now anticipated that he will start serving his sentence beginning on October 13.
On the other hand, Bond entered a not-guilty plea to the charges brought against her and was freed after posting a $1 million bail. As part of the legal process, Salame and Bond had to turn in their travel documents.
