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Four law firms have emerged as the biggest winners amid the crypto market’s recent turmoil, raking in a staggering $484 million in fees from high-profile crypto-related bankruptcies. As the digital asset market faced a wave of collapses in 2022, resulting in numerous Chapter 11 filings, these firms—Sullivan & Cromwell, Kirkland & Ellis, White & Case, and Cleary Gottlieb—secured 64% of the total $751 million awarded to legal professionals. Their involvement in these bankruptcies highlights a lucrative side of the crypto downturn, even as investors face significant losses.
The collapse of several major crypto firms in 2022, such as FTX, Voyager, BlockFi, Celsius, and Genesis, not only left investors reeling but also created a lucrative market for law firms specializing in corporate bankruptcy. The intricate nature of these cases, coupled with the substantial assets involved, made crypto-related bankruptcies a goldmine for legal professionals.
Sullivan & Cromwell, one of the most prominent law firms involved in these proceedings, netted the highest earnings. As the lead debtor’s counsel for FTX, the now-bankrupt cryptocurrency exchange, the firm charged over $10 million per month until February 2023, when it reduced its fees to $7 million monthly. By August, Sullivan & Cromwell had earned $215 million from its work on crypto-related bankruptcies, making it the top earner in this legal sector.
Kirkland & Ellis followed closely, billing $120 million for its services. The firm represented a number of high-profile crypto companies, including Voyager, BlockFi, and Celsius, as their lead debtor’s counsel. The majority of Kirkland & Ellis’s earnings came from its work with Celsius, where it pocketed over $75 million.
White & Case, another major player in the crypto-related bankruptcies, earned approximately $75 million. The firm was involved in the Genesis and Celsius cases, representing creditors and investigating the actions of Alex Mashinsky, the former CEO of Celsius. Their work in the Genesis case, particularly on behalf of the unsecured creditors’ committee, further solidified their position as a leading firm in this space.
Cleary Gottlieb, rounding out the top four, billed nearly $73 million for its legal services. The firm is serving as the lead counsel for Genesis in its ongoing bankruptcy proceedings. Since the start of the case, Cleary Gottlieb has been earning about $2.5 million monthly.
Despite the substantial sums already paid out to these law firms, the work is far from over. Crypto-related bankruptcies are complex and often drawn-out processes, with several cases still ongoing. Notably, the infamous FTX bankruptcy case, one of the most significant in the crypto world, continues to unfold. The confirmation hearing for FTX’s reorganization plan is scheduled for October, which could potentially bring even more legal fees for the firms involved.
Similarly, the Terraform Labs bankruptcy, stemming from the collapse of its algorithmic stablecoin TerraUSD, is another case that continues to generate legal fees. The reorganization hearing for Terraform Labs is set for September 19, a critical date for all parties involved.
Meanwhile, Genesis, one of the companies that filed for Chapter 11 bankruptcy, recently completed its restructuring plan. On August 2, the company paid off $4 billion in compensation to creditors, marking a significant milestone in its bankruptcy proceedings. However, the hefty fees collected by law firms throughout the process underscore the financial dynamics at play in crypto-related bankruptcies.
The immense legal fees associated with crypto-related bankruptcies highlight a stark reality: while investors and creditors face significant financial losses, law firms stand to gain substantially. These cases, often involving billions of dollars in assets, require extensive legal work, from navigating the complexities of digital assets to addressing the claims of countless creditors.
Experts in the legal field note that the high fees reflect the intricate nature of crypto-related bankruptcies. “These cases are not only about winding down companies but also about untangling a web of digital assets, regulatory issues, and multiple stakeholders,” said a legal expert familiar with bankruptcy proceedings.
As the crypto industry continues to evolve, the potential for future bankruptcies remains. Law firms, having established themselves as key players in these proceedings, are likely to continue reaping the rewards. For investors, the ongoing bankruptcies serve as a reminder of the risks inherent in the crypto market, where fortunes can be made and lost almost overnight.
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