A recent report initiated a wave of chatter in the crypto world revealing the whopping $700 million wallowed by lawyers, accountants, and consultants in the aftermath of several digital asset firms’ collapse last year. This sum revives the discourse against overcomplicated and undetermined digital asset regulations, which instigate more intricate processes and longer drafting times for legal documents, hence the ballooning legal costs.
FTX sits on top of the pile, amassing a staggering $326.8 million in legal fees after filing for bankruptcy alongside its sister company, Alameda Research in November 2022. Trailing behind is bankrupt crypto lender Celsius, which amounted to $186.5 million, while Voyager Digital and BlockFi cashed out $88.2 million and $59.5 million respectively.
The limelight doesn’t shy away from firms like Alvarez & Marsal extracting a massive chunk of $126 million and Sullivan & Cromwell along with Kirkland & Ellis bagging $111 million and $103 million respectively. An extensive list of over 50 professional firms, including bankers, blockchain transaction firms, and affiliated analysts, are directly benefiting in fees from these ongoing legal proceedings.
Victims, on the other hand, are bearing the harsh brunt and appear to be expressing grievances over the long-drawn and costly bankruptcy processes. Daniel Frishberg, a youthful Celsius investor who lost $3,000, calls out the ridiculous massive fees stating, “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.” Past the insolvency of Voyager, creditors filed a motion challenging huge fees as they accused lawyers managing bankruptcy of noting enormous fees, including $10,000 monthly hotel bills.
Nonetheless, attorneys are defending their fees asserting that they are charging market rates to recoup billions for the creditors. FTX bankruptcy lawyers Sullivan & Cromwell have indicated that more than $7 billion was retrieved for the beleaguered exchange. Lately, a spokesperson for the new FTX management team emphasized that the bankruptcy was “extraordinary in almost every conceivable way,” implying attorneys were working around the clock to trace user funds across various jurisdictions.
In essence, while these booming fees may be providing a financial windfall to the legal sector, the wide gaping hole in digital asset regulations has given rise to this quandary. The sooner the regulators roll out comprehensive and clearly defined rules, the better the chances of mitigating such financial calamities. Without action, this serves as a potential inoculation against the adoption of cryptocurrencies by new investors.
Source: Cryptonews
