The bankruptcies of five major cryptocurrency firms have been a boon for corporate turnaround specialists.
That’s according to a report published Tuesday (Sept. 5) by The New York Times, showing that professionals such as attorneys, accountants, consultants and crypto analysts have billed more than $700 million in fees since last year.
The report, based on the newspaper’s analysis of court records, says that the sum is likely to balloon as cases involving FTX, Celsius Network, Voyager Digital, BlockFi, and Genesis Global continue in the months to come.
According to the report, while large fees aren’t unusual in complex corporate bankruptcy cases, things are a bit different in the crypto world. The people who lost money are amateur investors, and these fees eat away at the funds owed to creditors.
The fees are “exorbitant and ridiculous,” said Daniel Frishberg, a 19-year-old investor who lost about $3,000 when Celsius collapsed. “At every hearing, they have an army of people there, and most of them don’t need to be there. You don’t need 20 people taking notes.”
The report says lawyers and other professionals counter that they are charging market rates for work that will in the end recover investors’ lost funds. For example, attorneys in the FTX case have found more than $7 billion in assets, though the NYT says it’s not clear how much of that money will go to creditors.
The NYT report argues that the rising fees are indicative of “the broken promises of crypto,” an industry sold to amateur traders as a way to get a seat at the high finance table.
And as PYMNTS noted last month, “the industry’s reputation as a lawless Wild West of digital innovation” was what attracted many of the sector’s most enthusiastic disciples.
“The crypto community believed and had a real conviction that what they were doing was so new that existing laws could not possibly apply,” Amias Gerety, partner at QED Investors, told PYMNTS. “And in the history of financial services, there’s basically never been a group of people with any commercial success who had that conviction. [O]nce you have that conviction, then you start searching for excuses not to comply [with the law].”