Bankruptcy Managers Profited In Millions from Crypto Bankruptcies: NYT
The global cryptocurrency market shook following last year’s fiascos following the major companies falling. The majority of these once-prominent companies in the emerging financial markets filed for bankruptcy. The most affected class in all the incidents was those investors who put their hard-earned money into the platforms and their losses counted in billions of dollars. But there is a group of entities who were in profits of centi-millions of dollars, or around $700 Million to be exact.
The New York Times recently reported that the instances that resulted in the loss of millions of dollars and ramped up regulatory scrutiny over the burgeoning class also ended up being a “financial bonanza” for people involved in corporate turnaround.
The report following the analysis of court records noted that lawyers, accountants, consultants, crypto analysts, and some similar professionals accumulated over $700 Million in fees. To gather this hefty amount of capital, these groups took around a year, or since the five major cryptocurrency firms filed for bankruptcy.
These five crypto firms include Celsius Network, Voyager Digital, BlockFi, Genesis Global, and FTX.
According to the analysis by The NYT, the legal and turnaround team for the crypto exchange FTX charged $326 Million in fees. This is followed by crypto network Celsius Network with $186.5 Million, crypto brokerage firm Voyager Digital paid $88.2 Million, lending firm BlockFi paid $59.5 Million, and trading platform Genesis Global paid $52.9 Million. In total, these five major firms paid $713.9 Million in fees since their bankruptcy filings last year.
Top Bankruptcy Law Firms to Gain Most
The analysis also found the entities that remained most profitable despite the chaos for investors. Among the five different cases for the aforementioned companies, FTX bankruptcy manager Sullivan & Cromwell and Kirkland & Ellis, which is looking over three crypto companies’ bankruptcies are at the top.
Sullivan & Cromwell reported charging over $110 Million as legal fees and $500K in expenses. Kirkland & Ellis handed over the bill of overall $101 Million for the work and $2.5 Million in expenses to its three clients.
In a noteworthy development, the cost of bankruptcy cases has seen a significant surge in recent years. According to data from Reorg, a trusted credit and bankruptcy information provider, the average hourly rate for bankruptcy lawyers at Sullivan & Cromwell has soared to $2,000 in the current year, compared to $1,300 back in 2018.
Additionally, research conducted by legal authorities Lynn LoPucki and Joseph Doherty reveals that professional fees associated with bankruptcies have been steadily increasing at an annual rate of approximately 10% from 1998 to 2007.
