Bankruptcy cases of significant prominence have proven to be highly profitable for Sullivan and Cromwell as well as Kirkland and Ellis, two prominent law firms deeply engaged in the legal proceedings.
Legal firms such as Sullivan & Cromwell and Kirkland & Ellis have garnered over $700 million in fees from handling significant cryptocurrency bankruptcy cases. Among these cases are notable entities like FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital. These high-profile bankruptcies have presented lucrative opportunities for these firms in recent years.
FTX lawyers, advisers score $700 million in fees
Sullivan & Cromwell, currently overseeing the case involving FTX Trading Ltd, led by Sam Bankman-Fried, stands to gain significantly. The cryptocurrency exchange, based in the Bahamas, filed for bankruptcy in November 2022 following a surge in customer withdrawals that uncovered an $8 billion shortfall in FTX’s accounts.
Reports indicate that the bankruptcy of FTX has generated more than $500 million in fees for its legal representatives and advisors, with overall expenses skyrocketing. Administrators of the bankruptcy process have requested an astonishing $700 million in fees and expenses. While some of these requests have been reduced by 20%, others are still pending approval.
In filings submitted to the court, it has been disclosed that Sullivan and Cromwell, serving as special counsel for the FTX estate, have been granted approval for $254 million in fees, despite initially billing $360 million. Financial advisers Alvarez and Marsal come next, with approved fees totaling $133 million.
Other firms and advisers, such as AlixPartners, Quinn Emanuel Urquhart and Sullivan, Perella Weinberg Partners, and Landis Rath and Cobb, have collectively invoiced $57 million.
FTX CEO John Ray III has been charging $5.6 million per hour at a rate of $1,300, while RLKS Executive Solutions, the estate’s chief officers, have submitted invoices totaling $26 million.
In separate proceedings, the Official Committee of Unsecured Creditors has accumulated $81 million in fees and $1.5 million in expenses, whereas the Ad Hoc Committee has sought fees of less than $5 million.
$120 million for Celsius, Voyager, BlockFi counsel
A Bloomberg report suggests that Kirkland and Ellis may have amassed more than $120 million as the primary legal counsel for three prominent crypto exchanges that underwent Chapter 11 proceedings during the height of cryptocurrency downturns in 2022.
In January, Kirkland and Ellis submitted its last fee request for three bankruptcy cases, aiming for $76 million for the Celsius case, a substantial increase compared to the $27 million and $16 million garnered from the Voyager and BlockFi cases, respectively.
The total fees collected by the firm for the three cases sum up to $120 million, with the Celsius case contributing the majority of the amount.
Celsius declared bankruptcy in July 2022 following the collapse of TerraUSD and its digital currency, Luna. Voyager Digital followed suit in July 2022, subsequent to the bankruptcy filing of the hedge fund Three Arrows Capital. BlockFi joined the list in November 2022 after FTX, its creditor with a $400 million credit line, also filed for bankruptcy.
Based on data from the Thomson Reuters Institute, demand for bankruptcy practices saw a year-over-year growth of 4.4% in 2023, the highest among all practices. This was closely followed by litigation, which experienced a growth rate of 3.2%.
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