McDermott Will & Emery, the law firm representing Voyager’s committee of unsecured creditors, has issued a massive bill of more than $5 million to the group for work it did between March and May.
The latest bill reinforces a perception in the cryptocurrency community that law firms are profiteering at the expense of the creditors they represent.
Huge legal fees
The law firm’s legal services bill was disclosed in a legal filing on July 3, 2022, with the United States Bankruptcy Court for the Southern District of New York. The latest bill brings the total amount collected by the creditor group to more than $16 million, well above the $11.2 million originally budgeted for during the restructuring process. Creditors have paid the company $8.9 million in attorney fees to date. The combined hourly rate for all timekeepers is $1,026.76, according to the filing.
Some of the largest billing areas for McDermott Will & Emery attorneys in a given month included $1 million in fees for nearly 917 hours of planning and disclosure settlement work. This includes discussing options for sale with debtors, meeting potential buyers and reviewing objections raised by other stakeholders. During the previous fee period, extensive work had been done in planning and disclosing the settlement during the possible sale of the Voyager assets to FTX. However, the deal fell through as FTX itself filed for bankruptcy. The legal bill, already completed, tops the $1.1 million Voyager bill to law firm Kirkland & Ellis for work done on behalf of the exchange.
law firm joy
The market downturn has led to the bankruptcy of many cryptocurrency companies, which has been highly profitable for law firms. Voyager The firm filed for bankruptcy in 2022 after it revealed it had significant exposure to the defunct cryptocurrency hedge fund Three Arrows Capital. Voyager then attempted to trade with multiple entities including FTX and Binance. However, the FTX deal fell through after the Sam Bankman-Fried-led exchange filed for Chapter 11 bankruptcy protection in the United States. The FTX bankruptcy is the largest bankruptcy in the crypto industry to date.
Following these developments, Binance withdrew from the potential deal in April 2023, citing the hostile regulatory climate for cryptocurrencies under the current chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler. The U.S. Bankruptcy Court for the Southern District of New York approved Voyager’s liquidation plan, which will repay its customers $1.33 billion in digital assets.
The result of the entire legal process is that Voyager Had to spend a lot of legal fees. Last week, it was reported that law firm Kirkland & Ellis, representing Voyager, had billed the company $1.1 million for work it completed in April of this year.
One man’s loss is another man’s gain
The cryptocurrency winter started with the decoupling of the Terra algorithm stablecoin UST and the collapse of the entire ecosystem, triggering a domino effect in the cryptocurrency space. As a result of the crash, the contagion spread, leading to the collapse of several prominent crypto entities. This list includes Vauld, Celsius, Hodlnaut, BlockFi, Voyager, and FTX, entities considered to be leaders in the cryptocurrency space.
Lawyers and law firms take full advantage of this, earning a lot of income from struggling law firms in the form of legal fees. In December 2022, bankrupt crypto lender Celsius was one of the first casualties of crypto winter, with attorneys representing the company collecting nearly $53 million from the company’s bankruptcy filing through October of the same year legal fees. Celsius has filed for Chapter 11 bankruptcy in mid-July 2022.
FTX is the biggest victim of the cryptocurrency winter, with legal costs exceeding $200 million since filing for bankruptcy in November 2022. It’s also worth noting that the FTX bankruptcy affected more than 130 entities affiliated with the exchange.
Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.