BlockFi Bankruptcy Set to Pay Big Law Firms $40 Million in Fees

Four Big Law firms representing failed cryptocurrency exchange BlockFi Inc. in its Chapter 11 case are poised to earn $40 million in fees after securing a plan to liquidate the business.

BlockFi, which blew up in the wake of the FTX implosion last year, will pay the biggest bill to Kirkland & Ellis, which has requested a final fee of more than $16 million for its work on the case.

Haynes Boone, which also represented BlockFi since its November 2022 Chapter 11 filing, has requested more than $12.5 million in fees, according to a filing Friday.

Brown Rudnick, another law firm representing BlockFi, requested more than $10.5 million in fees. And local counsel Cole Schotz requested nearly $1 million in fees.

The BlockFi case, which won court approval for its liquidation plan in October, was just one of a slew of crypto exchange bankruptcies that have kept Big Law firms busy this year.

Kirkland represented two other major crypto exchanges in bankruptcies: Celsius Network LLC and Voyager Digital Holdings Inc.

The firm billed more than $27 million for its work in the Voyager case, which won court approval for a liquidation plan in May.

Celsius won court approval for a plan to become a creditor-owned Bitcoin mining firm last month. Kirkland has not applied for final compensation in that case, but it had billed more than $60 million in fees through August, according to a Bloomberg Law analysis of court records.

Sullivan & Cromwell represents FTX Trading Ltd. in its ongoing Chapter 11 filing. The firm in September requested $32 million in fees for its work from May through July.

A large portion of Kirkland’s work for BlockFi involved investigating whether BlockFi’s estate should litigate, settle, release, or simply retain potential causes of action against company insiders.

The firm released a 170-page report in July that recommended settling claims against the insiders in exchange for cash and a promise that they would assist the company in litigation against companies BlockFi blamed for its demise, including FTX and hedge fund Three Arrows Capital.

BlockFi in October agreed to mediate a dispute over whether Sam Bankman-Fried’s failed crypto exchange owed it more than $1 billion, Bloomberg reported.

The legal releases were challenged during the bankruptcy, but the company secured a liquidation plan after a settlement with creditors and the judge overruling challenges from the US Justice Department’s bankruptcy watchdog.