FTX Creditors File Lawsuit Against Legal Firm Over Fraud Allegations
Creditors of bankrupt crypto exchange FTX have filed a class-action lawsuit against a global law firm that provided legal counsel to the former digital asset empire. The creditors accuse Sullivan and Cromwell (S&C), based in New York City, of engaging in civil conspiracy, aiding and abetting fraud, aiding and abetting fiduciary breach, and violating federal laws against racketeering. S&C oversaw the FTX bankruptcy proceedings and assisted the exchange in various deals, including the acquisition of LedgerX. The lawsuit alleges that S&C conspired with FTX despite being aware of the misappropriation of customer funds and other forms of fraud.
Accusations of Active Participation in Fraud
The creditors claim that Sullivan and Cromwell actively participated in FTX’s multi-billion-dollar fraud for financial gain. They argue that the law firm had knowledge of FTX’s misrepresentations and omissions to customers, untruthful conduct, and misappropriation of funds but still stood to benefit financially from FTX’s misconduct. The suit also alleges that S&C assisted and encouraged FTX’s breach of fiduciary duties by facilitating business acquisitions and providing assistance in deceiving regulators.
Violation of Federal Laws
The filing asserts that S&C’s employment with FTX violated the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal law against businesses with illegally derived income. The suit holds S&C jointly and severally liable for the acts of their co-conspirators under RICO. The plaintiffs claim that S&C’s conduct and participation in the alleged racketeering activity caused significant damages to themselves and other class members.
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