FTX’s bankruptcy law firm, Sullivan and Cromwell LLP, is in the spotlight amid allegations of potential conflicts of interest and bad ethics.
S&C used “deceptive tactics” to gain control of FTX from former CEO Sam Bankman-Fried, Temple University law professor Jonathan Lipson and University of Pennsylvania law professor David Skeel said. ) said. paper It was published last week under the title “FTX’d: The Conflict of Public and Private Interests in Chapter 11.”
“This article shows that he, too, was ‘FTX’ed by giving up control of his company at the request of his lawyers, who appeared to be motivated by his own concerns,” the professors said in the paper. “We do not challenge the jury’s verdict or the company’s need to use Chapter 11, and we are concerned about BigLaw lawyers marshaling and manipulating claims in the ‘public interest’ to advance or protect their own interests.”
FTX contaminated Former CEO Sam Bankman-Fried was found guilty of defrauding FTX users and investors in November 2023 and is currently awaiting sentencing next week.
The bankruptcy itself has endured disagreement over S&C’s role. FTX Creditors contaminated A class action lawsuit was filed against S&C last month, alleging that the company gained knowledge of the exchange’s operations and ultimately assisted in the fraud. Bankman-Fried also said he strong-armed the law firm into pressuring the exchange into bankruptcy and naming John Ray III as CEO.
“S&C may have violated its ethical obligations of confidentiality, candor and loyalty by reporting these alleged crimes to prosecutors without the consent of its customers and by deceiving Bankman-Fried into handing over control of FTX to Ray (who was selected by S&C). S&C “The promise we knew for sure was a lie,” the professors said.
The professors said Bankman-Fried likely could have secured new funding if S&C had waited a few days longer to file Chapter 11.
An S&C spokesperson refuted the document and referred The Block to a statement from the FTX debtor.
“In an effort to support Mr. Bankman-Fried at the expense of his victims and the dedicated professionals who have worked tirelessly to redress the harm he has caused, some scholars and others, with apparent collaboration, have spread his false narrative. I followed along like a parrot. “It will enhance his standing and image before the court that will sentence him,” the statement said. He stated, “In fact, he is grateful for the work of a large team of dedicated advisors, including Sullivan, Cromwell, and others who have been unfairly maligned.” Under Mr. Bankman-Fried’s defense strategy, billions of additional dollars would have been lost or stolen, and the amount customers would be able to recover would be only a fraction of what we can expect today. “It is time to place blame where blame is due.”
in court filing On Wednesday, FTX CEO Ray said he and other board members have no affiliation with FTX, Bankman-Fried or other FTX Group leaders. He also called Bankman-Fried’s past statements about no harm to customers “reckless” and “false.”
Court Appointed Examiner
Shortly after the exchange filed for bankruptcy, U.S. Trustee Andrew R. Vara asked a bankruptcy judge to appoint an outside investigator to look into the cryptocurrency exchange’s collapse independent of current FTX CEO John Ray III. Ray has previously opposed this and said the investigation he heads is sufficient. But the appeal court later ruled. january This means that an independent examiner must be appointed.
On Wednesday, U.S. Bankruptcy Judge John Dorsey appointed former Unabomber prosecutor Robert Cleary as an examiner.
“Although the examiners cannot yet find out, S&C’s resistance to intervention means that much of the damage cannot be undone,” the professors said in the paper.
Edited: Mar 21 21:21 UTC: The FTX debtor’s statement was initially attributed to an FTX spokesperson. Sullivan & Cromwell LLP. Instead, the spokesperson provided a statement as part of his response.
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