Lawyers, accountants, and consultants make up professionals who have raked in over $700 million in fees following the collapse of several digital asset firms last year.
A new report by the New York Times shows how the unfortunate crypto incidents have led to an unexpected “financial bonanza” for lawyers and other bankruptcy case-related professionals.
While the fees calculated from court filings and disclosures are described as huge by both observers and victims, these fees will increase further as some bankruptcy proceedings still have no end in sight.
FTX leads the pack with $326.8 million in legal fees so far after both the exchange and its sister company Alameda Research filed for bankruptcy in November 2022.
Bankrupt crypto lender Celsius follows FTX with $186.5 million while Voyager Digital and BlockFi recorded $88.2 million and $59.5 million respectively.
A look at the firms that have taken a large chunk of this money shows that Alvarez & Marsal have charged $126 million while Sullivan & Cromwell and Kirkland & Ellis have charged $111 million and $103 million respectively.
The report shows over 50 professional companies or partnerships directly drawing benefits in fees from these continued legal proceedings. Among the firms include bankers, blockchain transaction firms, and associated analysts.
A major reason cited for the huge legal fees is the uncertain nature of digital asset regulations leading to more complex processes and longer times in drafting legal documents.
Victims rue expensive litigation
In all of this, the victims have borne the brunt of the prolonged and expensive bankruptcy proceedings. Generally, bankruptcy proceedings are expensive because of the need to untangle complex court documents and trace lost assets.
Several victims have complained about the excessive legal fees, describing them as “unnecessary” and “expensive” for investors who lost their entire savings.
Daniel Frishberg, a 19-year-old Celsius investor who lost $3,000 stated that the huge fees are ridiculous adding that “At every hearing, they have an army of people there, and most of them don’t need to be there. You don’t need 20 people taking notes.”
Last year, Voyager creditors filed a motion protesting huge fees as they alleged that lawyers handling bankruptcy recorded huge fees including hotel bills catering hitting $10,000 a month.
On their part, attorneys have defended their fees stressing that they charge market rates to recover billions for the creditors. FTX bankruptcy lawyers Sullivan & Cromwell have revealed that the firm has recovered an excess of $7 billion for the embattled exchange.
Recently a spokesperson for the FTX new management team noted that the bankruptcy“was “extraordinary in almost every conceivable way,” leading to lawyers working overtime to track user funds across multiple jurisdictions.