Ruholamin Haqshanas
Last updated:
February 18, 2024 at 18:00 GMT+2
| 2 min read
Source: blackday/Adobe
FTX creditors have filed a class-action lawsuit against the law firm overseeing the exchange’s bankruptcy, Sullivan & Cromwell (S&C).
The creditors allege that S&C actively participated in FTX Group’s multibillion-dollar fraud and benefited financially from it.
According to court filings on February 16, FTX creditors claim that S&C had knowledge of FTX US and FTX Trading Ltd.’s fraudulent conduct and misappropriation of funds belonging to class members.
“Despite this knowledge, S&C stood to gain financially from the FTX Group’s misconduct and so agreed, at least impliedly, to assist that unlawful conduct for its own gain,” the filing read.
The class-action lawsuit seeks damages on several counts, including civil conspiracy, aiding and abetting fraud, and aiding and abetting fiduciary breaches.
S&C Previously Counseled FTX on Deals.
Sullivan & Cromwell, a century-old law firm, has been overseeing the FTX bankruptcy proceedings.
It has had a previous working relationship with FTX, serving as outside counsel in various deals, such as FTX’s asset bid for Voyager Digital Holdings and the acquisition of LedgerX.
The law firm received significant payments for its services. In the current bankruptcy case, S&C’s fees are estimated to reach hundreds of millions of dollars.
The connection between FTX and Sullivan & Cromwell was established through Ryne Miller, a former partner at S&C who joined the FTX Group as general counsel in August 2021.
It is alleged that Miller redirected at least 20 cases from FTX to his former law firm.
Former FTX chief regulatory officer, Daniel Friedberg, stated in a court filing that Miller expressed the importance of channeling business to S&C as he intended to return there as a partner after his time at FTX.
Bankman-Fried and S&C Had Close Relationship.
The complaint also highlights the close relationship between former FTX CEO Sam Bankman-Fried and S&C, noting that Bankman-Fried often worked in the law firm’s New York offices.
“S&C gained detailed knowledge about the financials of Mr. BankmanFried himself through, as further alleged above, their representation of him in his personal capacity for a complicated stock purchase related to Robinhood,” the filing said.
In response to the allegations, a spokesperson for Sullivan & Cromwell has denied any wrongdoing.
The spokesperson said that the firm had never served as primary outside counsel to any...
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