Professionals Earned $700M from Crypto Firm Bankruptcies: NYT

 

Professionals Earned $700M from Crypto Firm Bankruptcies: NYT


In the wake of last year's cryptocurrency debacles, which saw several major companies in the emerging financial markets collapse, the global cryptocurrency market was sent reeling. Many of these once-prominent firms ultimately filed for bankruptcy. 

The most severely impacted group in all of these incidents was the investors who had entrusted their hard-earned money to these platforms, resulting in losses amounting to billions of dollars. However, there exists a category of entities that managed to turn a substantial profit, amassing hundreds of millions of dollars, or approximately $700 million to be precise.

According to a report by The New York Times, the events that resulted in the loss of millions of dollars and increased regulatory attention in the emerging cryptocurrency industry also proved to be a lucrative opportunity for those involved in corporate turnarounds.

The report, based on an examination of court records, highlights that attorneys, accountants, consultants, cryptocurrency analysts, and similar professionals collectively earned more than $700 million in fees. It took them approximately one year, from the time the five major cryptocurrency companies declared bankruptcy, to amass this substantial sum of money.

The New York Times has reported that five cryptocurrency firms, namely Celsius Network, Voyager Digital, BlockFi, Genesis Global, and FTX, paid a total of $713.9 million in fees to their legal and turnaround teams since filing for bankruptcy last year. Among them, FTX paid the highest fees at $326 million, followed by Celsius Network at $186.5 million, Voyager Digital at $88.2 million, BlockFi at $59.5 million, and Genesis Global at $52.9 million.

In the analysis, it was revealed that among the five different cases involving the mentioned companies, the bankruptcy manager for FTX, Sullivan & Cromwell, and Kirkland & Ellis, which is overseeing the bankruptcies of three crypto firms, emerged as the most profitable entities.

Sullivan & Cromwell reported charging over $110 million in legal fees and $500,000 in expenses. Kirkland & Ellis billed a total of $101 million for their services and $2.5 million in expenses for their work with three different crypto firms.

A significant trend worth noting is the substantial increase in bankruptcy case costs in recent years. Data from Reorg, a reputable source for credit and bankruptcy information, indicates that the average hourly rate for bankruptcy lawyers at Sullivan & Cromwell has surged to $2,000 in the current year, a substantial increase from the $1,300 rate observed in 2018.

Furthermore, a study conducted by legal experts Lynn LoPucki and Joseph Doherty has shown that professional fees linked to bankruptcy cases have been on a consistent rise, increasing at an annual rate of around 10% from 1998 to 2007.

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