Judge in FTX bankruptcy case denies motion to remove top NYC attorneys | CNN Business


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One of America’s most famous law firms has emerged as a contender in the complex FTX dollar.

A judge has ruled that the bankrupt crypto platform can retain Sullivan & Cromwell as legal counsel, overturning objections from FTX customers who accused the company of conflict of interest. g

Delaware Bankruptcy Judge John Dorsey rejected an emergency motion to postpone the proceedings, saying Thursday that there was no evidence of any real conflict here.

Attorneys for the two FTX members filed the motion, accusing Sullivan & Cromwell of being vague in its disclosures about the money it received from the bankruptcy. FTX’s former top attorney then supported the motion in the court filing, which included additional allegations that one of his former partners had abandoned FTX’s business to Sullivan & Cromwell. .

But Dorsey’s ruling said that “a potential conflict is not just a nullity.”

The truth is, Dorsey said, in any major bankruptcy case “it’s almost impossible” for the creditor’s attorney to have no business running a business. Having lawyers from other firms ameliorate any disputes on the part of Sullivan & Cromwell because those lawyers can step in if needed, he said.

Sullivan & Cromwell revealed last month that before the FTX crash, it had received about $8.5 million from the crypto company for legal work since 2021.

However, a lawyer for the defendants – FTX customers who lost access to $ 400,000 when the situation collapsed in November – said “serious concerns” about the law firm’s “lack of clarity in his legal information and his ability to lead an objective investigation in the first Activity of the FTX Group.

In a separate court filing Thursday night, FTX’s top lawyer Daniel Friedberg tried to support the buyers’ request — while also contesting allegations of inappropriate behavior by someone who was formerly employed at FTX who was formerly a partner at Sullivan & Cromwell. Friedberg alleged that the lawyer had given business to Sullivan & Cromwell, hoping to gain interest in the firm which he hoped to return.

Dorsey rejected Friedberg’s claim: “The truth is, it’s full of hearsay, information, speculation, rumors,” he said. “It’s certainly not something I would allow to be put into evidence in any event.”

The US Trustee, which represents the Department of Justice before the court, dropped its own objection to the suspension of the company on Friday because of additional information filed to clarify the potential disputes. from

An attorney for Sullivan & Cromwell told the court that “the disclosure we filed is, in my experience, the most complete disclosure I’ve ever seen a debtor’s attorney make.. . We’ve gotten down to the nitty gritty of the details.”

A representative of Sullivan & Cromwell declined to comment beyond what was said in court on Friday.

Earlier this month, a group of US senators also raised objections to Sullivan & Cromwell’s participation in the FTX bankruptcy. In a letter to the judge, Senators John Hickenlooper, Thom Tillis, Elizabeth Warren and Cynthia Lummis urged him to appoint an independent investigation to oversee the investigation into the collapse of FTX, citing clear conflicts of interest.

“The law firm of Sullivan & Cromwell advised FTX for several years leading up to its bankruptcy and one of its partners became FTX’s general counsel,” they wrote. “As lawyers are often at the center of large financial matters … it is very reasonable to have concerns about the impartiality and manner in which Sullivan & Cromwell will conduct any FTX investigation. ”

FTX founder Sam Bankman-Fried, who has pleaded not guilty to multiple fraud and conspiracy charges related to his crypto empire, is also exist. try to create suspense with company participation.

He is written on January 12 that “S&C was one of the first law firms of FTX International before bankruptcy.” He described the company as one of the “first parties” that “strong-armed” him to resign as CEO of FTX. Bankman-Fried stepped down as CEO at the same time the company filed for bankruptcy. He was replaced by a specialist in restructuring, John J. Ray III, who is overseeing the bankruptcy of the company.

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