The crypto sector has experienced a noteworthy surge in high-profile bankruptcies, resulting in a substantial increase in legal costs and creating a profit avenue for major law firms like Sullivan & Cromwell and Kirkland & Ellis. These firms have collectively earned over $700 million from overseeing complex cases emerging from the financial chaos and operational mismanagement evident in the cryptocurrency industry.

Legal Costs Surge Amid Industry Bankruptcies

The rise in legal expenses has been chiefly propelled by the collapses of key cryptocurrency entities such as FTX Trading Ltd, Genesis Global Capital, BlockFi, Celsius, and Voyager Digital. These bankruptcies have underscored the inherent uncertainties and hazards inherent in the crypto market, exposing the extensive legal and administrative expenditures required to address intricate financial frameworks. Notably, Sullivan & Cromwell has played a pivotal role in managing the legal complexities surrounding the high-profile FTX insolvency.

The bankruptcy proceedings initiated in November 2022, post the disclosure of FTX's dramatic $8 billion shortfall, have proven to be a significant revenue stream for Sullivan & Cromwell. The firm's legal fees, in conjunction with those of other advisors, have contributed to a total expenditure exceeding $500 million, with combined fee demands surpassing $700 million.

Despite some fee reductions of up to 20%, the financial strain remains substantial. For instance, Sullivan & Cromwell successfully secured $254 million of its $360 million bill, while financial consultants Alvarez and Marsel earned $133 million in legal fees.

Various Firms Involved in the FTX Case

Aside from Sullivan & Cromwell, other firms entangled in the FTX case include AlixPartners, Quinn Emanuel Urquhart and Sullivan, Perella Weinberg Partners, and Landis Rath and Cobb, jointly claiming $57 million in fees. Additionally, FTX CEO John Ray III and RLKS Executive Solutions have invoiced significant sums, with Ray charging $1,300 per hour, totaling $5.6 million, and RLKS billing $26 million.

The Official Committee of Unsecured Creditors has also accrued $81 million in fees and $1.5 million in expenses, whereas the Ad Hoc Committee's expenses remained under $5 million. Another significant player in crypto bankruptcies, Kirkland & Ellis, has earned over $120 million for their roles in the Celsius, Voyager Digital, and BlockFi cases. These cases, all filing for Chapter 11 during the crypto market downturn in 2022, brought substantial revenues to the firm. The Celsius bankruptcy, arising from the collapse of TerraUSD and Luna, singularly accounted for $76 million in fees, while Voyager and BlockFi added $27 million and $16 million in fees, respectively.