The recent financial collapse of FTX Trading and Silicon Valley Bank underscores the notable financial rewards that restructuring practices in law firms can bring. Sullivan & Cromwell, a legacy Wall Street firm, has experienced significant gains from their investment into restructuring practices, billing over $180 million from November 2022 with leading representation of FTX Trading Ltd. and Silicon Valley Bank’s parent through Chapter 11. The staggering amount equates to approximately 10% of the revenue Sullivan & Cromwell reported to The American Lawyer in 2022.
The newfound financial success for Sullivan & Cromwell represents a significant shift in the bankruptcy landscape, providing greater impetus for notably large law establishments to engage in Chapter 11 work. A turning point for Sullivan & Cromwell was in 2008, with the financial fall of Lehman Brothers, illuminating the missed revenue opportunities in bankruptcy work.
Despite the remarkable success, the firm’s role in the FTX case has drawn regulatory scrutiny, particularly due to the firms work for the exchange prior to its downfall amid fraud allegations. The legal community at large, including Jonathan Lipson, a law professor from Temple University, has been advocating for an independent examination of the FTX fraud.
With the spotlight trained on this high-profile case, Sullivan & Cromwell and other law firms are grappling with regulatory and customer scrutiny even as they reap substantial gains from leading bankruptcy cases in the unregulated world of crypto finance.