The CEO of crypto exchange FTX has declined a call for a representative from his law firm to serve as lead counsel in his bankruptcy case.
John J. Ray III, who was appointed as the new CEO of FTX on November 11, filed the lawsuit sent on January 17 arguing that Sullivan & Cromwell were instrumental in managing the “waste fire” that was assigned to him.
Ray suggested that maintaining their services was in the best interest of FTX’s creditors, arguing:
“The counselors are not the bad guys in these cases. The bad guys are being pursued by the appropriate criminal authorities as a result of the information and support they are receiving on my behalf from the debt counselors.
US Trustee Andrew R. Vara filed a resistance in arresting the law firm on January 14, citing two separate cases.
He said that Sullivan & Cromwell failed to properly disclose his connections and previous work for FTX. He also stated that based on public knowledge, the former law firm partner became an attorney at FTX 14 months prior to the bankruptcy filing.
Meanwhile, the lawyer James A. Murphy, who goes on Twitter to run MetaLawMan, suggested on January 14 that the first job he did for FTX was not the only conflict the law firm’s interests in the matter.
At the same time Sullivan & Cromwell’s attorneys had unrestricted access to all internal information about the value of FTX’s assets and liabilities…
Apollo Global (reportedly) is quietly offering to buy debt from FTX customers for pennies on the dollar.
— MetaLawMan (@MetaLawMan) January 13, 2023
He said that the private company Apollo Global is buying the debts of the creditors from the FTX customers for a fraction of their cost. Murphy said that the chairman of Apollo, Jay Clayton, who is also employed by Sullivan & Cromwell, has access to sensitive financial information.
The US Trustee also believed that the current request to stop Sullivan & Cromwell is wrong, because they will “usurp” the work of an independent investigator and the parties will double down join their services to the value of the estate of FTX.
The Trustee first called for the appointment of an independent investigator on December 1, citing a section of the bankruptcy law. direct the assignment by an auditor when certain debts exceed $5 million.
Target: SBF said Sullivan & Cromwell was conflicted with the claims it could not pay
On January 10, a group of four US agents sent a letter to the Delaware bankruptcy judge John Dorsey, asking him to accept the motion to hire an independent investigator and expressing their disbelief that the law firm can be labeled as a “disinterested” party.
However, Dorsey called the letter an “unnecessary technical communication,” and said he would don’t ignore it when he decides whether to appoint an independent auditor or approve the retention of Sullivan & Cromwell.
But Dorsey is ready to consider the resistance A creditor of FTX filed on January 10 to decide whether to suspend Sullivan & Cromwell, with the creditor also suggesting that the agency’s first job lawyer for FTX is a conflict of interest.