Turmoil in the cryptocurrency industry has rattled major exchanges and sent the value of digital assets tumbling, but at least one group stands to gain: bankruptcy lawyers.
High-profile bankruptcies involving crypto exchange FTX, hedge fund Three Arrows Capital and crypto lenders BlockFi, Celsius Network and Voyager Digital Ltd are generating new opportunities – and big fees – for law firms that counsel troubled companies.
Large law firms can rake in more than $100 million in legal fees during a long-running bankruptcy, experts said.
“You’ve got to pay the gravedigger,” said Adam Levitin, a law professor at Georgetown University who specialises in bankruptcy law.
“These are complicated cases with a bunch of novel issues, and it shouldn’t be surprising that they are going to require a lot of attorney involvement,” he added.
The value of bitcoin has dropped 65% so far this year, dragging down other crypto assets and leaving investors reeling. The spectacular implosion of FTX last month sent fresh shock waves through the cryptocurrency industry.
One US law firm, Kirkland & Ellis, is representing BlockFi in its bankruptcy case filed on Monday and is also lead counsel for Celsius Network and Voyager Digital, which both filed for bankruptcy earlier this year.
Kirkland commands some of the highest billing rates in the industry, charging up to $1,995 per hour for work by its partners on the Celsius and Voyager cases, according to court filings.
The firm, which did not respond to a request for comment, has billed an average of about $3.3 million every month in each of those cases so far.
Law firm billing rates are normally not public, but in bankruptcy cases lawyers for the debtor company must detail their billings and request a judge’s approval for their fees.
The lawyers are paid from the assets of a bankruptcy estate and experts said judges rarely demand significant reductions in professional fees.
Published in The Express Tribune, December 3rd, 2022.
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