In the amphitheatre of cryptocurrency, it isn’t the mining companies or exchanges that reap the most promising bounties; it’s the lawyers, accountants, and consultants. Their wealth originates from the instability of the industry, charging an eye-watering $700 million in legal fees and expenses over the past year, provided by their work on crypto bankruptcy cases. This striking figure, extracted by The New York Times, covers a span of just over a year, from July 2022 to July 2023, encompassing some of the most significant cryptography firms – FTX, Celsius Network, Genesis Global, Voyager Digital, and BlockFi.
Acknowledged as the greatest profiteers are the legal minds entangled with the FTX case, who have exacted an impressive $326 million in total charges. The superior law firm, Sullivan & Cromwell, which orchestrates FTX’s bankruptcy, is said to have levied upwards of $110 million in legal fees alone.
Before we attribute this unwieldy compensation to greed alone, it is imperative to understand the environment the legal experts are navigating – a nascent, highly volatile, and innovative market with scarce regulations. These uncertainties make the bankruptcy cases complex, time-consuming, and thus, costlier. This murky area is further exemplified with Sam Bankman Fried’s trial that commences in October, escalating the total bankruptcy case costs.
Aside from Sullivan & Cromwell, several other notable entities including Kirkland & Ellis and Alvarez & Marsal, have racked up significant charges, ringing in at $101 million and more than $125 million respectively for their work on various crypto company bankruptcies.
Despite these extraordinary legal fees, they are regarded as justified by appointed fee examiner Katherine Stadler in June, stating that the fees are ‘reasonable’. This raises the question – are these elevated costs truly necessary, or is it a reflection of our ill-prepared legal system struggling to catch up with the digital asset revolution? Or, treading along lines of scepticism, could these exorbitant charges be masterfully designed to profit from the lack of transparency and regulation, effectively exploiting the ‘Wild West’ of cryptocurrencies?
Intriguingly, amidst an ocean of regulatory uncertainties, the legal industry has discovered a golden opportunity, resulting in a surprising upswing for the profession. Regardless, as cryptocurrency gradually moves towards mainstream acceptance, one cannot help but wonder about the evolving role of legal experts and the necessity for clear cryptocurrency regulations to mitigate such monumental costs. Until then, it appears the lawyers and consultants are set to enjoy their lucrative harvest.
Source: Cointelegraph
