Unabomber Prosecutor Approved to Investigate FTX’s Law Firm for Conflicts of Interest
A U.S. bankruptcy judge has given the green light to Unabomber prosecutor Robert J. Cleary to probe law firm Sullivan and Cromwell’s potential conflicts of interest in relation to FTX, according to a court filing. Cleary’s appointment marks a key shift in the examination of FTX’s collapse, reversing his previous rejection of an independent examiner in February 2023. Sullivan and Cromwell played a major role in FTX’s Chapter 11 bankruptcy proceedings and has charged over $170 million for its services.
Class Action Lawsuit Against Sullivan and Cromwell
Last month, several FTX investors filed a class action lawsuit against Sullivan and Cromwell, accusing the law firm of participating in “racketeering activity” with Sam Bankman-Fried’s exchange. The investors claimed that the firm had deep insight into FTX’s organizational structure and lack of internal controls through its advisement to the exchange. They also alleged that Sullivan and Cromwell misled customers and investors about the solvency and security of FTX Group before its collapse.
Concerns Over Conflict of Interest Prompt Investigation
The approval of Cleary’s investigation comes after a federal appeals court mandated the reversal of Judge John Dorsey’s decision in February 2023. The court cited the need for added security to the crypto sector as a whole following FTX’s collapse. Judge Luis Felipe Restrepo highlighted the potential implications for the cryptocurrency industry, including further scrutiny on practices such as using cryptocurrency tokens to inflate company values.
Calls for Objective Investigation
Critics of FTX’s collapse have long called for an objective investigation, with Senators John Hickenlooper, Thom Tillis, Cynthia Lummis, and Elizabeth Warren penning a letter to Judge Dorsey in January 2023. They expressed concerns about the impartiality of Sullivan and Cromwell in conducting an investigation into FTX’s collapse, given the law firm’s role in major financial scandals.
FTX CEO Pushes Back
FTX CEO John J. Ray III has pushed back against the appointment of an independent examiner, claiming that the company is now fully independent from the convicted fraudsters. However, Cleary is set to return a report detailing his findings within sixty days. Sam Bankman-Fried is scheduled for sentencing on March 28th in Manhattan federal court.
Hot Take: Unabomber Prosecutor to Investigate FTX’s Law Firm for Conflicts of Interest
In a significant development, Unabomber prosecutor Robert J. Cleary has been approved by a U.S. bankruptcy judge to investigate law firm Sullivan and Cromwell for potential conflicts of interest related to FTX’s collapse. This marks a shift in the examination of FTX’s bankruptcy proceedings and raises questions about the involvement of Sullivan and Cromwell. The approval comes after investors filed a class action lawsuit against the law firm, accusing it of participating in “racketeering activity” with FTX. The investigation aims to shed light on Sullivan and Cromwell’s role and determine if there were any conflicts of interest that contributed to FTX’s downfall.
Sources: Class Action Lawsuit, Letter from Senators
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