Controversial law firm Sullivan & Cromwell is on track to reap a fortune from its work on the bankruptcy case of the FTX cryptocurrency exchange, according to a new report.
Sullivan & Cromwell’s costs in the FTX case are estimated to reach hundreds of millions of dollars before the firm’s bankruptcy investigation is over, Bloomberg Law reported on Jan. 27.
As the FTX trial is scheduled for October 2023, the firm’s lawyers now have about eight months to untangle the complicated FTX case, which will cost a lot of time and money. Sullivan & Cromwell has more than 150 people working on the FTX case, including 30 partners with rates exceeding 2,000 per hour. Associates are charging up to about $1,500 per hour, the report notes, citing a court filing.
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In a court declaration, Sullivan & Cromwell said that its proposed fees are in accordance with market rates by other leading law firms and actually represent a discount from the rates used in non-bankruptcy matters.
Bankruptcy experts have been facing a high demand as the crypto winter of 2022 generated a big number of bankruptcy filings, including those by major crypto firms like Genesis, Celsius Network and Voyager Digital.
According to Jonathan Lipson, a Temple University law professor, lawyers are going to do very well in cases like FTX, “just as the professionals have done very well in other big cases.” For example, New York-based law firm Weil Gotshal made about $500 million in fees from the bankruptcy of Lehman Brothers in 2008.
Lipson said that such big expenses can be justified as Sullivan & Cromwell can potentially help investigators recover money from FTX, stating:
“The important question is never are the lawyers charging a lot; it’s is it worth it? If they can recover a lot of money, then it’s probably worth it.”
The news comes shortly after FTX bankruptcy judge John T. Dorsey on Jan. 19 approved Sullivan & Cromwell’s retention as FTX’s legal team despite controversy about the firm allegedly having potential conflicts of interest in the case.
Good news for Sullivan & Cromwell. The FTX Bankruptcy Judge just approved their retention amid scathing allegations by a former FTX Chief Regulatory Officer. No continuance to investigate but the Judge’s decision made sense and S&C’s arguments were compelling/very well-presented. pic.twitter.com/ZSVZdGyvkw
— John Reed Stark (@JohnReedStark) January 20, 2023
The decision came despite concerns related to Sullivan & Cromwell having advised FTX since before it filed for Chapter 11 protection in November. On Jan. 9, United States senators John Hickenlooper, Thom Tillis, Elizabeth Warren and Cynthia Lummis called on the judge to approve a motion to appoint an independent examiner into FTX’s activities.
Sullivan & Cromwell subsequently emphasized that the law firm has “never served as primary outside counsel to any FTX entity” and had a “limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy”.
The firm did not immediately respond to follow up questions from Cointelegraph.