FTX Creditors File Lawsuit Against Sullivan & Cromwell Over Alleged Fraud
Creditors of FTX, a cryptocurrency exchange, have filed a class-action lawsuit against law firm Sullivan & Cromwell (S&C), which is overseeing FTX’s bankruptcy proceedings. The creditors claim that S&C actively participated in FTX Group’s multibillion-dollar fraud and financially benefited from it. They allege that S&C had knowledge of fraudulent conduct and misappropriation of funds by FTX US and FTX Trading Ltd. The lawsuit seeks damages on several counts, including civil conspiracy and aiding and abetting fraud. S&C has a previous working relationship with FTX and has received significant payments for its services.
S&C’s Previous Relationship with FTX
Sullivan & Cromwell has been overseeing FTX’s bankruptcy proceedings and has previously served as outside counsel for the exchange in various deals. The law firm received substantial fees for its services. The connection between FTX and S&C was established through Ryne Miller, a former partner at S&C who joined FTX as general counsel. It is alleged that Miller redirected cases from FTX to his former law firm.
Close Relationship Between Bankman-Fried and S&C
The lawsuit also highlights the close relationship between former FTX CEO Sam Bankman-Fried and S&C. Bankman-Fried often worked in S&C’s New York offices, giving the law firm detailed knowledge about his financials. A spokesperson for S&C has denied any wrongdoing and stated that the firm had only a limited relationship with FTX prior to the bankruptcy.
Hot Take: Potential Conflict of Interest in FTX Bankruptcy Case
The allegations against Sullivan & Cromwell raise concerns about potential conflicts of interest in the FTX bankruptcy case. The law firm’s previous ties to FTX and its affiliates, as well as the close relationship between Bankman-Fried and S&C, have drawn scrutiny. In January 2023, US senators requested an independent examiner to ensure confidence in the investigation and findings. S&C is also expected to be appointed as the independent monitor for Binance Holdings, following the cryptocurrency exchange’s multibillion-dollar settlement with the US government.
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