The collapse in cryptocurrency prices last year forced a procession of major companies out of business, prompting a government crackdown and wiping out the savings of millions of inexperienced investors. Nevertheless for a small group of corporate restructuring specialists, the cryptocurrency implosion has turned into a financial bonanza.
Lawyers, accountants, consultants, cryptocurrency analysts and other professionals have racked up more than $700 million in fees since last year from the bankruptcies of five major cryptocurrency companies, including digital currency exchange FTX, according to an analysis by New York Moments court records. That sum is likely to increase significantly as cases develop in the coming months.
High fees are common in corporate bankruptcies, the resolution of which requires complex and time-consuming legal work. But in the world of cryptocurrency, the rising fees have sparked widespread outrage because many of the people owed money are hobby traders who lost their personal savings, rather than corporations with the ability to weather a financial crisis. Every dollar of commissions is deducted from the pool of funds that will be returned to creditors in the event of bankruptcies.
“Exorbitant and Ridiculous Fees”
According to 19-year-old investor Daniel Frishberg, the fees are “exorbitant and ridiculous.” Daniel lost about $3,000 when cryptocurrency company Celsius Community filed for bankruptcy last year. “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.”
To account for overhead fees, The Times analyzed more than 5,000 pages of billing statements and other court documents from the bankruptcies of crypto companies FTX, Celsius Network, Voyager Digital, BlockFi and Genesis World. The totals include fees that a bankruptcy judge has formally approved, as well as some that are awaiting approval and could be reduced.
Among the biggest winners in the five cases are two major law firms. Sullivan & Cromwell, which handles the FTX bankruptcy, has collected more than $110 million in legal fees and has recorded more than $500,000 in expenses. Kirkland & Ellis has billed $101 million for its work on three of the cryptocurrency bankruptcies, with $2.5 million in expenses, according to Occasions’ analysis.
According to the analysis, more than 50 other professionals have also benefited, including specialized startups that analyze crypto transactions, as well as accountants, consultants, and investment bankers.
The rising costs reflect the broken promises of cryptocurrency, a renegade industry that has been presented to amateur traders as a force for equality in the ultra-stratified world of high finance. After months of price gouging and social media hype, the cryptocurrency market went into a disaster last year that cost investors billions in savings and allowed lawyers, bankers and other traditional power brokers to reap huge Profits.
As the industry has struggled to recover, bankruptcy fees have come under intense scrutiny from the hyper-online community of crypto obsessives, who have spent hundreds of hours poring over the statements companies are required to file. publicly in court.
In the FTX bankruptcy, creditors have raised concerns about hourly rates charged by Sullivan & Cromwell, which top out at $595 for paralegals and $2,165 for partners. Last fall, Voyager’s creditors filed a motion complaining that attorneys overseeing the bankruptcy were spending thousands of dollars per person on hotel stays and billing $10,000 a month for catering.
Lawyers and other bankruptcy professionals argue that they are charging market rates for hard work that will ultimately help recover money lost by cryptocurrency investors. In the case of FTX, Sullivan & Cromwell has said it has raised more than $7 billion in assets, though it’s unclear how much of that full force will return to creditors.
A spokesman for FTX’s new management said the bankruptcy was “extraordinary in almost every way imaginable,” requiring professionals to recreate records from scratch and locate missing funds. Andrew Dietderich, a partner at Sullivan & Cromwell, said in a statement that the lack of clear crypto regulations made cases more complex and time-consuming, driving up costs.
By Audy Castañeda
