One particular of America’s elite white-collar regulation corporations has emerged as a contentious figure in the sophisticated FTX saga.
A choose ruled that the bankrupt crypto platform could keep Sullivan & Cromwell as authorized counsel, overruling objections from FTX buyers who accused the agency of conflicts of desire. g
Delaware personal bankruptcy Judge John Dorsey dismissed an emergency movement to delay proceedings, declaring on Thursday there is “no evidence of any actual conflict listed here.”
The legal professionals for two FTX shoppers had submitted the movement, alleging Sullivan & Cromwell hadn’t been clear in its disclosures about dollars it had earned from the now-bankrupt system. Then FTX’s former major lawyer supported the motion in a court docket submitting, which included more allegations that 1 of his previous colleagues improperly funneled FTX business to Sullivan & Cromwell.
But Dorsey dominated that “a probable conflict is not for each se disqualifying.”
In point, Dorsey stated, in any massive bankruptcy case “it would be almost impossible” for the debtors’ counsel to have no overlapping business. The existence of attorneys from other corporations ameliorates any opportunity conflict on Sullivan & Cromwell’s section as people legal professionals can action in if needed, he mentioned.
Sullivan & Cromwell did disclose last thirty day period that prior to FTX’s collapse, it experienced acquired about $8.5 million from the crypto organization for lawful get the job done given that 2021.
Nonetheless, a attorney for the objectors — FTX consumers who collectively dropped accessibility to $400,000 when the platform collapsed in November — cited “grave concerns” about the regulation firm’s “lack of transparency in its necessary disclosures and its ability to guide an aim investigation into the FTX Group’s pre-petition routines.”
In a individual submitting to the courtroom Thursday night, FTX’s previous top lawyer Daniel Friedberg sought to again the customers’ motion — while also lobbing allegations of inappropriate perform by a previous colleague at FTX who had previously been a spouse at Sullivan & Cromwell. Friedberg alleged that that attorney funneled organization to Sullivan & Cromwell, hoping to curry favor with the organization to which he hoped to inevitably return.
Dorsey dismissed Friedberg’s declaration: “Frankly, it is, it’s complete of rumour, innuendo, speculation, rumors,” he said. “It’s certainly not a thing I would enable to be introduced into evidence in any occasion.”
The US Trustee, which represents the Department of Justice in court, dropped its own objection to the firm’s retention on Friday in mild of added disclosures that ended up filed clarifying possible conflicts.
A attorney for Sullivan & Cromwell advised the court that “the disclosure that we have submitted, in my working experience, is the most fulsome disclosure that I have ever noticed any debtor’s counsel make… We have long gone down to extraordinarily stages of detail.”
A representative for Sullivan & Cromwell declined to remark outside of what was reported in court Friday.
Earlier this thirty day period, a team of US senators also raised objections to Sullivan & Cromwell’s participation in the FTX bankruptcy. In a letter to the choose, Senators John Hickenlooper, Thom Tillis, Elizabeth Warren and Cynthia Lummis urged him to appoint an impartial examiner to oversee the investigation into FTX’s collapse, citing evident conflicts of desire.
“The legislation company of Sullivan & Cromwell encouraged FTX for several years major up to its collapse and a person of its partners even served as FTX’s basic counsel,” they wrote. “As authorized counsel is often central to significant economic scandals…it is properly sensible to have worries about the impartiality and fashion that Sullivan & Cromwell will solution any investigation of FTX with.”
FTX’s founder Sam Bankman-Fried, who has pleaded not responsible to a number of counts of fraud and conspiracy fees similar to his crypto empire, likewise has sought to increase suspicion around the firm’s involvement.
He wrote on January 12 that “S&C was a single of FTX International’s two main legislation corporations prior to personal bankruptcy.” He described the company as just one of the “primary parties” that was “strong-arming” him to move down as CEO of FTX. Bankman-Fried resigned as CEO at the identical time the organization submitted for bankruptcy. He was replaced by a restructuring professional, John J. Ray III, who is overseeing the company’s bankruptcy.