February 24, 2024

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Judge in FTX bankruptcy case rejects motion to remove elite NYC lawyers

Judge in FTX bankruptcy case rejects motion to remove elite NYC lawyers


New York
CNN
 — 

Just one of America’s elite white-collar regulation firms has emerged as a contentious figure in the complex FTX saga.

A choose dominated that the bankrupt crypto system could keep Sullivan & Cromwell as authorized counsel, overruling objections from FTX buyers who accused the organization of conflicts of fascination. g

Delaware personal bankruptcy Choose John Dorsey dismissed an unexpected emergency motion to hold off proceedings, saying on Thursday there is “no evidence of any genuine conflict below.”

The lawyers for two FTX customers experienced filed the movement, alleging Sullivan & Cromwell hadn’t been clear in its disclosures about funds it experienced attained from the now-bankrupt system. Then FTX’s former major attorney supported the movement in a court docket filing, which integrated added allegations that 1 of his former colleagues improperly funneled FTX organization to Sullivan & Cromwell.

But Dorsey dominated that “a opportunity conflict is not for each se disqualifying.”

In actuality, Dorsey claimed, in any significant bankruptcy circumstance “it would be virtually impossible” for the debtors’ counsel to have no overlapping enterprise. The presence of attorneys from other firms ameliorates any potential conflict on Sullivan & Cromwell’s part as those people lawyers can stage in if necessary, he explained.

Sullivan & Cromwell did disclose last thirty day period that prior to FTX’s collapse, it experienced earned about $8.5 million from the crypto business for legal function since 2021.

Continue to, a attorney for the objectors — FTX consumers who collectively lost obtain to $400,000 when the platform collapsed in November — cited “grave concerns” about the legislation firm’s “lack of transparency in its required disclosures and its capacity to lead an goal investigation into the FTX Group’s pre-petition functions.”

In a individual filing to the court Thursday evening, FTX’s former prime attorney Daniel Friedberg sought to again the customers’ movement — whilst also lobbing allegations of inappropriate perform by a previous colleague at FTX who had previously been a companion at Sullivan & Cromwell. Friedberg alleged that that attorney funneled business enterprise to Sullivan & Cromwell, hoping to curry favor with the business to which he hoped to at some point return.

Dorsey dismissed Friedberg’s declaration: “Frankly, it’s, it is complete of rumour, innuendo, speculation, rumors,” he explained. “It’s definitely not something I would make it possible for to be launched into evidence in any occasion.”

The US Trustee, which represents the Division of Justice in court, dropped its personal objection to the firm’s retention on Friday in mild of extra disclosures that had been submitted clarifying likely conflicts.

A law firm for Sullivan & Cromwell informed the court docket that “the disclosure that we have submitted, in my expertise, is the most fulsome disclosure that I have at any time found any debtor’s counsel make… We have gone down to terribly concentrations of depth.”

A consultant for Sullivan & Cromwell declined to remark past what was said in courtroom Friday.

Earlier this thirty day period, a group of US senators also lifted objections to Sullivan & Cromwell’s participation in the FTX bankruptcy. In a letter to the decide, Senators John Hickenlooper, Thom Tillis, Elizabeth Warren and Cynthia Lummis urged him to appoint an unbiased examiner to oversee the investigation into FTX’s collapse, citing evident conflicts of interest.

“The legislation company of Sullivan & Cromwell encouraged FTX for years main up to its collapse and a person of its companions even served as FTX’s basic counsel,” they wrote. “As authorized counsel is generally central to big economic scandals…it is properly fair to have considerations about the impartiality and way that Sullivan & Cromwell will solution any investigation of FTX with.”

FTX’s founder Sam Bankman-Fried, who has pleaded not responsible to various counts of fraud and conspiracy costs connected to his crypto empire, similarly has sought to elevate suspicion close to the firm’s involvement.

He wrote on January 12 that “S&C was just one of FTX International’s two major regulation companies prior to individual bankruptcy.” He described the agency as one particular of the “primary parties” that was “strong-arming” him to move down as CEO of FTX. Bankman-Fried resigned as CEO at the exact time the organization submitted for personal bankruptcy. He was replaced by a restructuring specialist, John J. Ray III, who is overseeing the company’s bankruptcy.