Law \ Legal

Conflicts Allegation — Crypto Matter Continues Conflicts Concerns in FTX Fight

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Senators, States and Creditors Challenge Sullivan & Cromwell’s Lead Role in FTX Bankruptcy” —

  • “U.S. Bankruptcy Judge John Dorsey of the District of Delaware rebuffed four U.S. senators in a Wednesday hearing regarding the senators’ unsolicited request that Dorsey appoint an independent examiner in the FTX bankruptcy, calling the ex parte communication ‘inappropriate’ and stating that it would not factor into his decisions.”
  • “Opposing Sullivan & Cromwell’s hiring as lead bankruptcy counsel, FTX creditor Warren Winter argued in a Tuesday amended objection that the firm’s retention represented multiple conflicts of interest. Most of the facts Winter brought derived from the law firm’s own application as lead counsel, which noted the firm collected $8.5 million in pre-petition legal fees for deal work prior to FTX’s collapse, and testimony founder Sam Bankman-Fried had planned to give to Congress before his arrest.”
  • “Winter, a U.S. citizen living abroad who stated he lost hundreds of thousands of dollars in his FTX account, argued that Sullivan & Cromwell’s conflicts of interests included the firm’s relationship with FTX general counsel Ryne Miller, a former partner at the firm, and Tim Wilson, an in-house lawyer and former Sullivan & Cromwell associate. He also noted that Sullivan & Cromwell has scrubbed its website of references to its work for FTX in the acquisition of Voyager Digital, another crypto firm that filed for bankruptcy in July.”
  • “Finally, Winter took issue with Miller’s demand—per Bankman-Fried’s planned testimony—for $4 million to retain Sullivan & Cromwell immediately after the Nov. 2 CoinDesk article called into question the company’s balance sheet and relationship with Bankman-Fried’s trading firm Alameda Research. FTX accordingly transferred Sullivan & Cromwell $2.2 million on Nov. 3, by far the largest payment it made to the law firm in the preceding six months. Miller’s demand for the $4 million transfer ‘is far from ordinary,’ Winter wrote, considering evidence that ‘untold’ assets were already stolen from the same asset pool.”

Sam Bankman-Fried Says Law Firm Worked Closely With FTX Before Bankruptcy” —

  • “Sam Bankman-Fried said cryptocurrency exchange FTX had a closer relationship than previously disclosed with its bankruptcy law firm Sullivan & Cromwell LLP, adding to questions about the law firm’s work for past FTX management.”
  • “The founder and former chief executive of FTX, back online and in a new blog post that could suggest elements of his upcoming legal defense, said Sullivan & Cromwell was one of the main forces pushing him to resign and for the exchange to file for bankruptcy. Mr. Bankman-Fried is currently under house arrest at his parents’ California home as he faces federal fraud charges. He pleaded not guilty on Jan. 3. “
  • “He added that FTX U.S.’s general counsel was a former member of the law firm without naming him. Ryne Miller previously served as a partner at Sullivan & Cromwell before joining FTX U.S. in August 2021. “
  • “Law firms seeking to work on chapter 11 cases are required under bankruptcy rules to disclose any past representations that could pose a conflict of interest before they can be officially retained. A spokesman for Sullivan & Cromwell said it had no comment beyond a statement it issued on Jan. 10, in which it said the firm ‘never served as primary outside counsel to any FTX entity. The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy, as is common, and is disinterested as required by the bankruptcy code.’”
  • “Companies commonly use existing law firms to handle bankruptcy filings. But the arrests of Mr. Bankman-Fried and other former FTX executives have drawn lawmakers’ attention to Sullivan & Cromwell’s prior work for the exchange.”
  • “Sullivan & Cromwell charged FTX more than $8.5 million in legal fees for work it did for the firm before the bankruptcy, according to the law firm’s retention application.”

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