The latest twist in the FTX bankruptcy saga involves a fresh lawsuit against the law firm Sullivan & Cromwell. Creditors of the defunct cryptocurrency exchange allege a conflict of interest, given the substantial sum of $180 million the firm accrued from managing FTX-related matters. Concerns are mounting over the law firm’s previous advisory role for FTX and the perceived lack of neutrality in the ongoing bankruptcy process.
Creditor Concerns Over Legal Impartiality
At the heart of the suit are the prior engagements and financial transactions between Sullivan & Cromwell and FTX. The law firm’s history as outside counsel, including $8.5 million in legal fees over 16 months, has sparked questions about the legitimacy of the firm’s involvement in the bankruptcy hearings. Additionally, scrutiny has intensified around Ryne Miller, a former attorney of Sullivan & Cromwell turned FTX Chief Legal Officer in 2021.
The suit asserts that Sullivan & Cromwell had an intimate understanding of FTX’s internal operations and allegedly abetted deceptive practices. It also claims the law firm represented FTX’s closely affiliated entities and engaged in peculiar financial dealings involving an intermediary purportedly managing FTX customer funds.
Examining the Financial Gains
The lawsuit scrutinizes the financial rewards Sullivan & Cromwell received from its association with FTX, especially as the exchange faces bankruptcy. The law firm’s earnings from the bankruptcy case alone have surpassed $180 million, triggering backlash from FTX’s creditors. These profits lend weight to allegations of a conflict of interest due to the firm’s financial ties to the exchange.
The current litigation reflects broader concerns about Sullivan & Cromwell’s capacity to independently investigate FTX’s downfall. These apprehensions were first voiced by US senators and other parties, yet the firm was still appointed to oversee the bankruptcy proceedings.