Bloomberg Law
Dec. 15, 2022, 10:00 AM

Bankruptcy Lawyers Are Bootstrapping Their Way Into Crypto Cases

Roy Strom
Roy Strom

Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at the lawyers using Twitter to find clients in crypto exchange bankruptcies. Sign up to receive this column in your Inbox on Thursday mornings.

The last tweet David Adler fired off before July praised quarterback Nick Foles for helping the Philadelphia Eagles win the Super Bowl. In 2018.

On a Saturday over the summer, the New York bankruptcy lawyer at McCarter & English picked up his phone and searched Twitter for “Celsius,” the crypto exchange that filed for bankruptcy protection just days earlier.

Adler started responding to some of the desperate Celsius customers who were in the dark about what would happen to their now-frozen assets in a process most people know little about. There are some 1.7 million Celsius customers, and social media is their native platform.

Adler’s tweets got the attention of a group of Celsius customers who’d received cash loans for crypto they’d staked to the exchange. He was soon on the phone with one “whale” who posted about $20 million in Bitcoin to receive a $5 million cash loan.

“The borrowers were trying to organize themselves, and somehow they approached me and put me in touch with some of the large people in the group who retained me,” Adler said in an interview.

He now represents the group in Celsius’ bankruptcy proceeding. It totals about 13,000 borrowers who posted around $800 million in collateral on the exchange. His Twitter feed is a near-constant stream of news on the crypto chaos—including screen shots of court documents and quotes from bankruptcy proceedings.

Adler is just one example of a group of lawyers who’ve found crypto clients in non-traditional ways—scouring social media to put information in front of a rare group of bankruptcy participants: everyday people.

Few bankruptcies involve huge groups of “Regular Joe” creditors the way the failures of FTX, Celsius, BlockFi and Voyager do. When banks or regulated broker-dealers go under, federally regulated insurance programs exist to protect account holders. But those insurance regimes don’t exist in the unregulated world of crypto exchanges. And the place those customers congregate isn’t CLE classes or bar association functions.

“Lawyers have been on Reddit, Twitter, Telegram. For us middle-aged lawyers, it’s a little or a lot foreign,” said Deborah Kovsky-Apap, a Troutman Pepper partner. “But you meet your customers where they are. And if they’re on social media, that’s where you’re going.”

For her part, Kovsky-Apap used social media to understand crypto exchange customers’ top questions about the bankruptcy process.

She answered those questions in articles posted online.

Kovsky-Apap’s August article, “Whose Crypto Is It, Anyway?” delineated the different types of customer accounts in the Celsius bankruptcy and what types of treatment they could expect in a bankruptcy. A couple weeks after it published, she filed a court appearance to represent an ad hoc group of Celsius account holders who argue their assets should be returned.

Alexandra Steinberg Barrage left the Federal Deposit Insurance Corp. last year looking to put her bank regulatory knowledge to use in the burgeoning crypto world. When she joined Davis Wright Tremaine, she took on a leadership role for the firm’s cross-practice crypto and blockchain practice.

It turns out that her decade of experience as a bankruptcy lawyer earlier in her career, including working on Enron and Lehman Brothers cases, became an even more important skill. As the crypto industry convulsed, Barrage found herself in the right place at the right time.

“I was looking to do crypto and bank regulatory work. But over time, bankruptcy issues are really where the demand has been,” she said. “And there are very few people who understand traditional bankruptcy rules and crypto.”

Barrage is representing Ripple Labs in the Celsius bankruptcy case, according to court documents. She said the firm represents multiple clients across the crypto exchange bankruptcies.

She believes crypto and blockchain have staying power and will survive the current crisis. And she’s hopeful that when that day comes, she’ll return to helping the industry navigate a changing regulatory landscape.

“Crypto isn’t going away, and if you assume it’s not going away, then we need guardrails,” she said. “It’s not only a question of doubling down on enforcement. They need more oversight. They need to make sure it doesn’t happen again.”

If it does, lawyers will know where to look for clients.

Worth Your Time

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That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.

To contact the reporter on this story: Roy Strom in Chicago at

To contact the editors responsible for this story: Chris Opfer at; John Hughes at

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