© Reuters. FILE PHOTO: Representations of digital cryptocurrencies are positioned on U.S. greenback banknotes on this illustration taken November 28, 2021. REUTERS/Dado Ruvic/Illustration/File Picture
By Andrew Goudsward
(Reuters) – Turmoil within the cryptocurrency trade has rattled main exchanges and despatched the worth of digital belongings tumbling, however at the very least one group stands to realize: chapter legal professionals.
Excessive-profile bankruptcies involving crypto alternate FTX, hedge fund Three Arrows Capital and crypto lenders BlockFi, Celsius Community and Voyager Digital Ltd are producing new alternatives – and massive charges – for regulation companies that counsel troubled firms.
Massive regulation companies can rake in additional than $100 million in authorized charges throughout a long-running chapter, specialists mentioned.
“You’ve bought to pay the gravedigger,” mentioned Adam Levitin, a regulation professor at Georgetown College who focuses on chapter regulation. “These are sophisticated circumstances with a bunch of novel points, and it shouldn’t be stunning that they will require quite a lot of lawyer involvement.”
The worth of bitcoin has dropped 65% to this point this yr, dragging down different crypto belongings and leaving buyers reeling. The spectacular implosion of FTX final month despatched contemporary shock waves by means of the cryptocurrency trade.
One U.S. regulation agency, Kirkland & Ellis, is representing BlockFi in its chapter case filed on Monday and can also be lead counsel for Celsius Community and Voyager Digital, which each filed for chapter earlier this yr.
Kirkland instructions a few of the highest billing charges within the trade, charging as much as $1,995 per hour for work by its companions on the Celsius and Voyager circumstances, in accordance with courtroom filings. The agency, which didn’t reply to a request for remark, has billed a median of about $3.3 million each month in every of these circumstances to this point.
Regulation agency billing charges are usually not public, however in chapter circumstances legal professionals for the debtor firm should element their billings and request a choose’s approval for his or her charges.
The legal professionals are paid from the belongings of a chapter property, and specialists mentioned judges not often demand important reductions in skilled charges.
“Kirkland is dominant in giant public firm bankruptcies already, and that is simply extending to a brand new space of chapter,” mentioned Lynn LoPucki, a regulation professor on the College of Florida who has studied bankruptcies and company restructuring. “In the event that they dominate crypto, it is going to preserve them on the high.”
Amongst its bigger current circumstances, Kirkland earned $83 million in authorized charges and reimbursements for its work within the long-running chapter of satellite tv for pc providers supplier Intelsat, billing greater than 87,000 hours, courtroom filings present.
Kirkland companion Joshua Sussberg is lead counsel in all three of the agency’s crypto-related bankruptcies. He has been concerned in lots of main company bankruptcies lately, together with for movie show chain Cineworld Group and J.C. Penney Co Inc.
Wall Road agency Sullivan & Cromwell is chapter counsel for FTX. The agency has not but revealed its charges, however in a 2021 case involving Kumtor Gold Firm, the agency’s companions billed as much as $1,825 per hour.
Sullivan & Cromwell can also be representing buying and selling agency Alameda Analysis, based by FTX founder Sam Bankman-Fried, as a creditor within the Celsius and Voyager bankruptcies. The regulation agency didn’t reply to a request for remark.
As crypto bankruptcies mount, the regulation agency with the best most billing fee disclosed to this point is Latham & Watkins, which is advising Celsius on regulatory points and is debtor’s counsel to Three Arrows Capital. Its high fee is $2,075 an hour, in accordance with courtroom papers. Latham additionally didn’t reply to a request for remark.
The cryptocurrency circumstances are notably important for regulation agency chapter practices as Chapter 11 filings set off by the COVID-19 pandemic and the struggles of big-box retailers have begun to gradual, authorized specialists mentioned. Crises inside sure industries, equivalent to cryptocurrency, can preserve enterprise flowing and supply years of regular income.
Legal professionals within the crypto circumstances should cope with a bunch of points new to chapter regulation, together with whether or not digital belongings deposited on a platform are owned by the shopper or the platform itself, in accordance with chapter regulation specialists. That dedication might assist resolve how a lot of their deposit a buyer is more likely to recoup from a bankrupt agency.
Levitin, a former member of the restructuring division at regulation agency Weil, Gotshal, & Manges, mentioned such advanced questions name for top-shelf legal professionals.
“In any other case it turns into only a seize race the place it’s the most important and most subtle collectors grabbing every thing for themselves,” he mentioned.