The fees, considered significant by both observers and victims, are expected to increase further as some bankruptcy proceedings remain unresolved. FTX is leading the pack with $326.8 million in legal fees after both the exchange and its sister company Alameda Research filed for bankruptcy in November 2022.
Celsius, a bankrupt crypto lender, follows FTX with $186.5 million in fees, while Voyager Digital and BlockFi recorded $88.2 million and $59.5 million respectively.
The largest recipients of the fees include Alvarez & Marsal with $126 million in charges, Sullivan & Cromwell with $111 million, and Kirkland & Ellis with $103 million. More than 50 professional companies or partnerships are directly benefiting from these ongoing legal proceedings, including bankers, blockchain transaction firms, and associated analysts.
The complex and uncertain nature of digital asset regulations is a major factor contributing to the exorbitant legal fees, as it leads to more intricate processes and longer times for drafting legal documents.
Victims Express Frustration over Expensive Litigation
The victims of these bankruptcy proceedings have experienced the brunt of prolonged and costly legal procedures. Bankruptcy proceedings are generally expensive due to the need to unravel complex court documents and trace lost assets.
Several victims have criticized the excessive legal fees, describing them as unnecessary and expensive for individuals who have lost their entire savings. One Celsius investor, Daniel Frishberg, who lost $3,000, expressed his frustration, stating, “At every hearing, they have an army of people there, and most of them don’t need to be there. You don’t need 20 people taking notes.”
Last year, Voyager creditors protested against high fees, alleging that the bankruptcy lawyers had accumulated significant charges, including monthly hotel bills of up to $10,000.
Attorneys have defended their fees, emphasizing that they charge market rates to recover billions for the creditors. Sullivan & Cromwell, the bankruptcy lawyers for FTX, revealed that they have recovered over $7 billion for the embattled exchange.
A spokesperson for the new management team at FTX recently acknowledged that the bankruptcy was “extraordinary in almost every conceivable way,” leading to lawyers working overtime to track user funds across multiple jurisdictions.