Law firm says crypto miner's board waged 'scorched earth’ campaign to block legal fee

By Mike Scarcella

WASHINGTON, Feb 17 (Reuters) - U.S. law firm Lehotsky Keller Cohn has sued a committee of cryptocurrency miner Rhodium Enterprises’ board and an investor group, accusing them of interfering with an $11 million legal fee and attacking the firm’s reputation amid Rhodium’s bankruptcy.

Lehotsky Keller filed the lawsuit in U.S. bankruptcy court in Houston on Friday, alleging that a special board committee and investors orchestrated a “scorched-earth” effort to delay and reduce payment of a success fee that the firm said it earned helping Rhodium reach a $185 million settlement last year with Whinstone, a unit of cryptocurrency mining company Riot Platforms RIOT.O .

Texas-based Lehotsky Keller, a small firm founded in 2021 by a pair of former U.S. Supreme Court law clerks, had represented Rhodium before it sought bankruptcy protection in 2024. The firm was later retained in the bankruptcy as special litigation counsel to Rhodium.

Lehotsky Keller in its lawsuit said Rhodium’s special board committee, which was set up to steer the company through bankruptcy, refused to negotiate with the law firm over the size of its stake in the Whinstone settlement, and instead set out to impede the fee.

Lehotsky Keller said in the lawsuit that it suffered “severe” harm and has spent more than $1.5 million in fees and expenses “defending against defendants’ baseless attacks and recovering its success fee.”

The law firm declined to comment. Rhodium, an attorney for the special committee, and an attorney for the investors' group, did not immediately respond to requests for comment.

Lehotsky Keller claims the special committee refused to share information, ignored a requirement to negotiate the Whinstone settlement fees in good faith and made accusations in public that Lehotsky Keller breached its client duties and committed malpractice.

The special committee accused the firm of improperly trying to secure its success fee before the allocation of the Whinstone settlement had been determined, the lawsuit said. Lehotsky Keller denied any wrongdoing and said in court filings that the accusations against the firm were subsequently withdrawn.

A judge last December approved Lehotsky Keller's success fee. The special committee and investors' group have appealed the order.

The case is Lehotsky Keller Cohn v. Special Committee of the Board of Directors of Rhodium, U.S. District Court, Southern District of Texas, No. 24-90448.

For Lehotsky Keller: Joshua Wolfshohl and Michael Dearman of Porter Hedges

For Rhodium: no appearances yet