Crypto Winter’s Silver Lining: Bankruptcy Lawyers Are Cashing In on the Crypto Crash

The crypto world has been anything but stable lately. From market crashes to high-profile collapses, it’s been a rollercoaster for investors and companies alike. But amidst the turmoil, one industry is not just surviving, but thriving: bankruptcy law. Yes, you heard that right. While crypto firms are faltering, bankruptcy lawyers are experiencing a boom, and it’s all thanks to the dramatic events unfolding in the digital currency landscape. Let’s dive into how the crypto crash has become a bonanza for legal eagles.

Why Are Bankruptcy Lawyers Suddenly in High Demand?

The answer is quite simple: crypto company failures. Following the spectacular implosion of FTX, a domino effect has been triggered. As crypto firms fail, they inevitably end up in bankruptcy court. And who do they call when the financial ship hits the iceberg? You guessed it – bankruptcy lawyers.

Think of it like this: when a major crypto exchange or lending platform goes under, it’s not just a simple shutdown. It’s a complex legal and financial unraveling. Creditors need to be paid, assets need to be sorted, and legal battles ensue. This is where bankruptcy lawyers step in, navigating the intricate legal maze to manage these collapses.

Before the FTX saga, there were already significant crypto bankruptcies making headlines. Let’s take a quick look at some of the prominent names that paved the way for this legal gold rush:

• Celsius Network: A major cryptocurrency lender that froze withdrawals and eventually filed for bankruptcy.
• Voyager Digital: Another crypto lender that faced liquidity issues and also sought bankruptcy protection.
• Three Arrows Capital (3AC): A prominent crypto hedge fund that collapsed, sending shockwaves through the industry.
• BlockFi: Yet another crypto lending platform that succumbed to market pressures and filed for bankruptcy post-FTX collapse.

These aren’t small-time cases either. We’re talking about billions of dollars in assets and complex legal proceedings. And for every bankruptcy case, there are lawyers racking up billable hours.

The Price of Legal Expertise: Eye-Watering Hourly Rates

Ever wondered how much top-tier lawyers charge? In bankruptcy cases, the curtain is pulled back a bit. Unlike most legal scenarios where billing rates remain private, bankruptcy proceedings require attorneys for the bankrupt entity to disclose their rates for judicial approval. And these rates? They are substantial.

Here’s the interesting part: judges rarely reduce these expenses. They are typically paid from the assets of the bankruptcy estate, meaning these legal fees are a priority claim in the bankruptcy process.

Let’s talk numbers. Some of the top law firms involved in these crypto bankruptcies are generating serious revenue. We’re talking fees exceeding $100 million for some firms! That’s a significant windfall from the crypto winter.

Who Are the Big Legal Players in Crypto Bankruptcy?

Several prominent law firms have emerged as key players in the crypto bankruptcy arena. Let’s spotlight a few:

• Kirkland & Ellis: This American legal powerhouse has been at the forefront, representing major players in multiple cases. They serve as main counsel for:
  • BlockFi
  • Celsius Network
  • Voyager Digital

  Court documents reveal Kirkland & Ellis charges up to nearly $2,000 per hour for their services. In the Celsius and Voyager cases alone, their average monthly legal expenses have been a staggering $3.3 million each!

• Sullivan & Cromwell: This Wall Street firm is handling the high-profile FTX bankruptcy. While their rates haven’t been fully publicized for this case yet, earlier documents indicate they charge up to $1,825 per hour. They also represent Alameda Research (another Sam Bankman-Fried company) and creditors in the Celsius and Voyager bankruptcies, further cementing their position in the crypto legal landscape.
• Latham & Watkins: This firm has reportedly secured the highest billing rates so far in crypto bankruptcies, reaching over $2,075 per hour for their work with Celsius and Three Arrows Capital.

To put these hourly rates into perspective, imagine a single lawyer billing for a standard 40-hour work week at $2,000/hour. That’s $80,000 per week, or over $320,000 per month, just for one lawyer! And these firms have teams of lawyers working on these complex cases.

A Recurring Trend: Bankruptcy Practices See Peaks and Valleys

It’s not just crypto bankruptcies fueling this legal boom. Bankruptcy practices in general experience cycles. Remember the economic fallout from the coronavirus outbreak? That wave of business closures provided a surge in cases for bankruptcy firms. As those cases began to subside, along came the crypto winter, offering a fresh influx of work.

This cyclical nature highlights the counter-cyclical aspect of bankruptcy law. When the economy struggles, bankruptcy lawyers thrive. It’s a profession that, unfortunately, tends to do well when others are facing financial hardship.

Beyond Crypto: Bankruptcy in the News

While crypto bankruptcies dominate headlines in the financial world, other notable bankruptcy cases are also contributing to the workload of legal firms. A prime example is the bankruptcy filing of InfoWars host Alex Jones.

Alex Jones, known for his far-right broadcasting and conspiracy theories, including the false claim that the Sandy Hook massacre was a hoax, has filed for Chapter 11 bankruptcy in Houston. This came after a jury ordered him and InfoWars’ parent company to pay over $1 billion in damages to the families of Sandy Hook victims.

Despite acknowledging the tragedy after years of denial, Jones continues to spread conspiracy theories on his platform. His controversial statements have even led Elon Musk to maintain his Twitter ban, despite Musk’s emphasis on free speech on the platform.

The Alex Jones case, while vastly different from crypto bankruptcies, underscores the broader point: bankruptcy law is a busy field, and events across various sectors are driving demand for legal expertise in this area.

Conclusion: A Boom for Lawyers, A Bust for Crypto?

The crypto crash has undoubtedly been painful for investors and companies involved. However, for bankruptcy lawyers, it’s been an unexpected windfall. Firms like Kirkland & Ellis, Sullivan & Cromwell, and Latham & Watkins are reaping significant financial benefits from the wave of crypto bankruptcies, charging hefty hourly rates for their expertise in navigating these complex legal waters.

While the crypto industry grapples with the aftermath of market turmoil and company collapses, the legal profession stands as a clear beneficiary. It’s a stark reminder that in every economic downturn, there are always some who find opportunity amidst the crisis. For now, the crypto winter is certainly proving to be a very profitable season for bankruptcy lawyers.