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McDermott Will & Emery, the law firm representing Voyager’s committee of unsecured creditors, has sent the group a staggering bill of over $5 million for the work it has done between the months of March and May.
The latest bill reinforces the perception in crypto circles that legal firms are raking in the money at the expense of the creditors they are representing.
A Hefty Legal Bill
The bill for legal services provided by the law firm was revealed in a legal filing submitted to the United States Bankruptcy Court of New York’s Southern District on the 3rd of July, 2022. The latest bill brings the total compensation charged to the group of creditors to over $16 million, significantly above the $11.2 million initially budgeted as part of the restructuring process. The creditors have so far paid $8.9 million in legal fees to the firm. According to the filing, the blended hourly rate for all timekeepers stands at $1026.76.
Some of the biggest areas of billing from attorneys of McDermott Will & Emery for the stipulated months in question include $1 million billed for nearly 917 hours of work on plan and disclosure settlement. This includes discussing sale options with debtors, meeting potential buyers, and examining objections that other stakeholders have presented. In previous fee periods, significant work was carried out on plan and disclosure settlement during a potential sale of Voyager assets to FTX. However, this deal collapsed when FTX itself filed for bankruptcy. This legal bill comes over, and above a $1.1 million bill that Voyager paid to the law firm Kirkland & Ellis for work it completed when representing the exchange.
Law Firms Make Merry
The market downturn has led to many crypto firms going bankrupt, something that has been highly profitable for law firms. Voyager itself had filed for bankruptcy in 2022 after the firm revealed it had considerable exposure to Three Arrows Capital, the collapsed crypto hedge fund. Voyager then tried to broker deals with several entities, including FTX and Binance. However, the FTX deal fell through after the Sam Bankman-Fried-led exchange filed for Chapter 11 bankruptcy. The FTX bankruptcy was the largest bankruptcy in the crypto industry thus far.
Following these developments, Binance backed out of the potential deal in April 2023, citing a hostile regulatory climate prevailing in the United States, thanks to the position taken on crypto by current United States Securities and Exchange Commission (SEC) Chair Gary Gensler. The United States Bankruptcy Court for the Southern District of New York approved a liquidation plan for Voyager which would see its customers being reimbursed $1.33 billion in digital assets.
The entire legal process has resulted in Voyager having to spend a fortune on legal fees. Last week, reports emerged that Kirkland & Ellis, the law firm representing Voyager, charged the company $1.1 million for work it had completed in April of this year.
One Man’s Loss Is Another’s Gain
The crypto winter, which started with the de-pegging of Terra’s algorithmic stablecoin UST and the collapse of its entire ecosystem, set off a domino effect in the crypto space. As a result of the collapse, the contagion spread, leading to the collapse of several prominent crypto entities. This list includes Vauld, Celsius, Hodlnaut, BlockFi, Voyager, and FTX, entities that were considered leading lights in the crypto space.
Lawyers and legal firms have taken full advantage, making a significant amount from the beleaguered firms in the form of legal fees. In December 2022, lawyers representing bankrupt crypto lender Celsius, one of the first casualties of the crypto winter, billed the firm nearly $53 million in legal fees for the period beginning since the firm filed for bankruptcy until October of the same year. Celsius had filed for Chapter 11 in Mid-July, 2022.
FTX, the biggest casualty of the crypto winter, has run up a legal bill of over $200 million since the time it filed for bankruptcy in November 2022. It is also worth noting that FTX going bankrupt impacted over 130 entities that were affiliated with the exchange.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.