In June, Katherine Stadler, the FTX fee examiner, wrote that the bankruptcy was “on track to be very expensive by any measure.” She noted that the spending up to that point amounted to 10 percent of FTX’s remaining cash. In several of the cases, bankruptcy judges have appointed fee examiners - outside lawyers who monitor costs and work with the firms to eliminate unnecessary spending. FTX’s case has cost more than $325 million so far, in the most expensive of the five bankruptcies, ahead of the roughly $200 million in fees that Celsius has generated. The fees drawing the most scrutiny have come in the bankruptcy of FTX, the largest and highest-profile of the crypto firms that failed. Kirkland & Ellis is managing the Celsius, Genesis and Voyager bankruptcies, while Alvarez & Marsal, a turnaround management firm, has charged more than $125 million for its work on FTX, Celsius and Genesis.Īlvarez & Marsal didn’t respond to requests for comment. Lawyers, accountants and consultants sprang into action. That was followed by the demise of BlockFi and Genesis, which had also overseen billions of dollars. FTX failed in November, erasing as much as $9 billion in user funds. When the crypto market tumbled last year, Celsius and Voyager, which had styled themselves as experimental crypto banks, were the first to go under, costing investors more than $6 billion. And research by the legal experts Lynn LoPucki and Joseph Doherty shows that professional fees in bankruptcies grew about 10 percent a year between 19. The average hourly rate for bankruptcy lawyers at Sullivan & Cromwell rose to $2,000 this year from $1,300 in 2018, according to Reorg, a credit and bankruptcy data provider. He has billed $2.8 million for his work on the FTX bankruptcy, court records show.īankruptcy cases were not always so expensive. Ray III, the executive whom Sullivan & Cromwell tapped to run FTX after its collapse, has made a career of managing distressed companies like Enron and Fruit of the Loom. Over the past few decades, corporate bankruptcy has become a big business. Andrew Dietderich, a partner at Sullivan & Cromwell, said in a statement that the lack of clear crypto regulations made the cases more complex and time-consuming, driving up costs.Ī Kirkland & Ellis spokeswoman declined to comment. Every dollar in fees is deducted from the pool of funds that will be returned to creditors at the end of the bankruptcies.Ī spokesman for FTX’s new management said the bankruptcy was “extraordinary in almost every conceivable way,” requiring professionals to recreate records from scratch and track down missing funds. But in the crypto world, the mounting fees have sparked widespread outrage because many of the people owed money are amateur traders who lost their personal savings, rather than corporations with the ability to weather a financial crisis. Large fees are common in corporate bankruptcies, which require complex and time-intensive legal work to untangle. That sum is likely to grow significantly as the cases unfold over the coming months. Lawyers, accountants, consultants, cryptocurrency analysts and other professionals have racked up more than $700 million in fees since last year from the bankruptcies of five major crypto firms, including the digital currency exchange FTX, according to a New York Times analysis of court records. The collapse in cryptocurrency prices last year forced a procession of major firms into bankruptcy, triggering a government crackdown and erasing the savings of millions of inexperienced investors.īut for a small group of corporate turnaround specialists, crypto’s implosion has become a financial bonanza.
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