Crypto meltdown a boon for bankruptcy lawyers

Reuters via Yahoo ^ | December 2, 2022 | By Andrew Goudsward

[Oldeconomybuyer]

(Reuters) - Turmoil in the cryptocurrency industry has rattled major exchanges and sent the value of digital assets tumbling, but at least one group stands to gain: bankruptcy lawyers.

High-profile bankruptcies involving crypto exchange FTX, hedge fund Three Arrows Capital and crypto lenders BlockFi, Celsius Network and Voyager Digital Ltd are generating new opportunities - and big fees - for law firms that counsel troubled companies.

Large law firms can rake in more than $100 million in legal fees during a long-running bankruptcy, experts said.

“You’ve got to pay the gravedigger,” said Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy law. “These are complicated cases with a bunch of novel issues, and it shouldn’t be surprising that they are going to require a lot of attorney involvement.”

[butlerweave]

Crypto : a person who adheres or belongs secretly to a party, sect, or other group , Hmmm LOL

[jdege]

Cryptocurrencies and crypto exchanges are very different things. If you buy Bitcoin from an exchange, transfer it to your own wallet, and then the exchange goes bust, nothing at all happens to your coins.

[PAR35]

Money usually isn’t as good on the creditor side, but each big secured creditor will have its own firm, and then there is the unsecured creditor’s committee (sometimes more than one) - they can run up fees and expenses. Lots of opportunities for lawyers and accountants (and banks) in a big 11.

But I don’t know how much money the lawyers will really make in these. No time to arrange DIP financing, and is there really any money (or hard assets) left to pay the lawyers. Not like you can get money back from the Clinton Foundation or the DNC.

[babble-on]

You CAN get money back from the politicians of both parties, and the charitable foundations, too, if laws were broken in transferring the money. In this case it seems clear to me that a multitude of laws were broken.

Bankman-Fried has bought 112 million in Bahamian real estate. That can come back. Other partners did similar. I guess that the carcass of this thing might be enough to pay creditors 10 cents on the dollar. That assumes the crypto assets are worthless.

[Larry Lucido]

Large law firms can rake in more than $100 million in legal fees

Dang. I typically charge a $600.00 flat rate plus costs for a basic Chapter 7 with no assets. Clearly, I need to become a big law firm.

Let's see. I'll need a legal secretary, some more file cabinets, a water cooler and an office. Anything else? Oh, yeah. A stapler and an Open/Closed sign.

[Lonesome in Massachussets]

ANOTHER IN THE LITANY OF BIDEN'S ACCOMPLISHMENTS!

[Wally_Kalbacken]

I am enjoying the prospect of FTX being picked apart in a bankruptcy proceeding. I practice insolvency law - and one of the most critical decisions for an entity to make is whether to submit to the jurisdiction of the bankruptcy court (stepping into the bear trap) - or possibly to use a state law receivership mechanism as way of liquidating. If there is possible criminal liability and you can avoid entering the bankruptcy courts - it's not a bad idea to avoid them. With FTX, I doubt they had a choice. The decision was US Bankruptcy or Bahamian insolvency proceedings? If they had chosen Bahamian proceedings, a group of creditors would have filed a US bankruptcy case as an involuntary proceeding in the US. Because of the scope and scale of FTX they were going to get there one way or another. I only dream of clients like that - and with smaller businesses receivership is often a viable alternative. The United States Trustee Program is analogous to the US Attorney in a criminal prosecution - and they are pretty impressive. I expect them to slice and dice SBF until he wishes he never had the idea for Alameda or FTX.

[PAR35]

I’ll let you be the one to tell Hillary that you are there to collect.

[PUGACHEV]

You don’t need to be a big firm. Just move away from consumer work and pick up Chapter 11s and now SubV cases.

[Larry Lucido]

I’ve done two Chapter 11 cases, and both had to liquidate eventually. Swore I’d never take another one but will gladly refer them out.

The subchapter V cases sound like an interesting alternative. I’ll likely stay on the consumer side but may look into that.

[PUGACHEV]

You’re going to have your hands full with the new DOJ policy on student loan discharges.