As the cryptocurrency exchange FTX sought bankruptcy protection in November, the crisis of the company once valued at $32 billion didn’t alter plans for some law firms already taking the currency as payment for legal services. In December, the federal government charged FTX founder Sam Bankman-Fried with fraud, money laundering and campaign finance offenses. In January, he pleaded not guilty to the charges.
“Knowledge is key,” says James Burnie, a London-based financial services regulation and fintech partner with Gunnercooke, a law firm with offices in New York City and across the globe. That includes understanding various aspects of crypto, he adds, such as blockchain network systems.
Adoption of crypto among law firms is still slow, though other big firms, such as Steptoe & Johnson, have publicized that they accept it.
Burnie says his firm began accepting crypto payments in February 2022 in an effort to demonstrate its commitment and understanding of the community. But it hasn’t been without its share of issues, the biggest being that the value of cryptocurrency can change quickly. Like other lawyers interviewed by the ABA Journal in November, Burnie said his firm planned to continue accepting the tokens as payment despite the problems swirling around FTX, which the Associated Press described as the third-largest cryptocurrency exchange at the time of its collapse.
“Volatility cannot be eliminated; however, it can be mitigated against, and the question then becomes a holistic assessment of the risk versus the reward dynamic,” Burnie says. “We have resolved this by only accepting crypto-assets where we feel we have an understanding of the underlying risk profile and by operating [within an] internally agreed[-upon] risk framework.”
Unless attorneys are well-versed in crypto-assets, Burnie adds, it’s best to start small to work out operational infrastructure without large amounts at risk. A mistake like sending funds to the wrong place could result in an irreversible loss of assets.
Firms also need to consider whether the client’s legal work involves a regulated activity and examine the funding sources to make sure money laundering is not part of the transaction, Burnie says. There are conflicts-of-interest considerations too, like advising on the validity of a token used to pay the firm, he adds.
Additionally, the firm should determine if crypto fits with its financial risk profile. In other words, Burnie says, it needs to see if it works in terms of the firms’ ability to pay fixed overheads if the income value is volatile.