The Impact of Cryptocurrency Collapse on Bankruptcies
Last year, the collapse in cryptocurrency prices resulted in the bankruptcy of several major firms, leading to a government crackdown and devastating the savings of inexperienced investors. However, this situation presented a lucrative opportunity for a select group of corporate turnaround specialists.
Professionals such as lawyers, accountants, consultants, and cryptocurrency analysts have collectively earned over $700 million in fees from the bankruptcies of five prominent crypto companies, including FTX, a digital currency exchange. As these cases continue to unfold, this figure is expected to rise significantly.
Outrage over High Fees
While substantial fees are common in corporate bankruptcies due to the complexity of the legal work involved, the exorbitant fees in the crypto world have sparked widespread outrage. Many of the individuals owed money are amateur traders who lost their personal savings, making it even more difficult for them to recover their losses.
For example, Daniel Frishberg, a 19-year-old investor who lost $3,000 when Celsius Network filed for bankruptcy, criticized the excessive fees. He pointed out the unnecessary presence of numerous professionals at every hearing, questioning the need for such an extensive team.
Analyzing the Fees
To determine the overall fees, The New York Times meticulously analyzed thousands of pages of billing statements and court documents from the bankruptcies of FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global. The total fees include both approved amounts and pending fees that may be reduced.
Notably, two major law firms, Sullivan & Cromwell and Kirkland & Ellis, emerged as the biggest beneficiaries. Sullivan & Cromwell charged over $110 million in legal fees for managing FTX’s bankruptcy, while Kirkland & Ellis billed $101 million for their involvement in three crypto bankruptcies.
Additionally, more than 50 other professionals, including specialized startups, accountants, consultants, and investment bankers, have also profited from these cases.
The Broken Promises of Crypto
The soaring costs of these bankruptcies epitomize the broken promises of the cryptocurrency industry. Initially marketed as a means of financial equality, crypto eventually led to a crisis that wiped out billions of investors’ savings and allowed traditional power brokers to amass immense profits.
The bankruptcy fees have faced intense scrutiny from the crypto community, who have meticulously analyzed publicly filed billing statements. However, lawyers and other bankruptcy professionals argue that their fees reflect market rates and are necessary to recover investors’ lost money.
Hot Take:
The collapse of cryptocurrency prices resulted in devastating consequences for inexperienced investors, while a select group of professionals profited immensely from the subsequent bankruptcies. The exorbitant fees charged in these cases have sparked outrage, as they deplete the funds available for creditors. This situation highlights the broken promises of the crypto industry, which was initially marketed as a force for financial equality. Despite facing scrutiny, bankruptcy professionals claim their fees are justified in their efforts to recover investors’ lost money.
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