The real winners of the 2022 crypto crash: law firms

0

Last Updated on 6 November 2023 by CryptoTips.eu

Bitcoin is very boring again and seems to be waiting for some news on interest rates to change direction. In the United States the crypto crowd is counting down towards the FTX process which will start in a few weeks and in the meantime the New York Times calculated who the real winners were from last year’s crypto crash.

Remarkably, the groups that generated cash are the law firms that handled the bankruptcies of most crypto companies. The journalists calculated that they have so far received around 700 million dollars in fees for their work, while former customers of FTX, Celsius, Voyager digital and Genesis Global are still waiting for their customer funds to be returned.

Advertentie.

Billions of dollars

When several crypto currencies went bankrupt last year (first it was Terra and Luna, remember), Celsius and Voyager, which had presented themselves as experimental crypto banks, were the first major companies to fail as a result, leaving investors with a hole of some 6 billion dollars.

FTX collapsed in November, wiping out as much as 9 billion dollars in customer funds. That was followed by the demise of BlockFi and Genesis, which also left a multi-billion dollar drain.

Those five cases are being handled by different law firms, which are apparently all doing their best to collect as many assets as possible in order to ultimately recover funds for their clients.

American customers will probably be reimbursed first. But when you look at what all those law firms cost, some early crypto investors start to wonder whether there will be anything left.

Expenses

Law firm Sullivan & Cromwell, which is managing FTX’s bankruptcy, charged more than $110 million in legal fees and more than $500,000 in expenses. Kirkland & Ellis, another global law firm, billed $101 million for its work on three of the crypto bankruptcies, according to the analysis, with some $2.5 million in expenses as well.

The fees are “exorbitant and ridiculous,” said Daniel Frishberg, a 19-year-old investor who lost about $3,000 last year when crypto firm Celsius Network filed for bankruptcy. “There’s an army of lawyers at every hearing, and most of them don’t need to be there. You don’t need twenty people to take notes.”

Creditors of FTX have raised concerns about the hourly rates charged by Sullivan & Cromwell. These range from $600 per hour for paralegals and $2,000 per hour for partners. Last fall, Voyager’s creditors filed a motion complaining that lawyers overseeing the bankruptcy were spending thousands of dollars per person on hotel stays and $10,000 per month per month on catering.

Lawyers and other bankruptcy professionals meanwhile claim they are charging market rates for what is essentially difficult work that will help to recover the money crypto investors have lost. In the FTX case, Sullivan & Cromwell claim they have already recovered more than $7 billion in assets, although it is unclear how much of that total will go back to creditors.

In the end, it will be interesting to see how much money the court cases themselves will cost, such as the one against FTX’s Sam Bankman-Fried.

One thing is certain, there probably won’t be too much money left to reimburse foreign account holders of some of those American companies.

PromesaStudio / Depositphotos.com

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
View all posts