FTX’s Bankruptcy Law Firm Faces Class Action Alleging Involvement in Exchange’s Collapse
FTX’s bankruptcy law firm, Sullivan and Cromwell (S&C), is currently facing a class action lawsuit that claims the firm should be held partially responsible for the exchange’s collapse. The lawsuit alleges that S&C was closely involved with FTX prior to its collapse and gained knowledge of its fraudulent behavior. It also states that S&C billed around $8.5 million in fees during its 16-month tenure as FTX’s primary legal counsel. The class action further alleges that lawyer Ryne Miller, who joined FTX as General Counsel, pushed for business to be sent to S&C as outside counsel, resulting in various engagements. The lawsuit also highlights S&C’s income from overseeing the FTX bankruptcy proceedings, which has exceeded $180 million.
Concerns About S&C’s Role Raised by U.S. Senators
In January 2023, multiple U.S. Senators expressed concerns about S&C’s role in the FTX collapse and called for an independent examiner to oversee the investigation. Around the same time, former FTX CEO Sam Bankman-Fried claimed that S&C pressured the exchange into bankruptcy and influenced the appointment of its preferred CEO. In a bankruptcy hearing, creditors raised objections to S&C’s involvement and suggested it could be investigated for its own liability in the case. Despite objections, the judge approved S&C to be retained for the proceedings. However, in January 2024, the Third Circuit Court of Appeals ruled that an independent examiner must investigate FTX to shed new light on industry practices.
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