Objectors to FTX Using Sullivan & Cromwell as Its Law Firm Seek to Delay Court Hearing
The issue of the law firm is expected to be the subject of a bankruptcy court hearing scheduled for Friday.
Several parties to crypto exchange FTX's bankruptcy case who are objecting to crypto exchange FTX hiring the New York law firm of Sullivan & Cromwell are seeking to delay a hearing that's scheduled for 10 a.m. on Friday in the U.S. Bankruptcy Court in Delaware.
The hearing is expected to be about whether FTX can retain Sullivan & Cromwell amid allegations from Andrew Vera, the U.S. trustee in the case, that the hiring presents a conflict of interest. At least two FTX customers and FTX's former counsel have filed similar objections.
Vera said that FTX’s general counsel, Ryne Miller, previously worked at Sullivan & Cromwell for eight years, adding that this nondisclosure makes it "wholly insufficient to evaluate whether S&C satisfies the Bankruptcy Code’s conflict-free and disinterestedness standards."
Warren Winter and Richard Brummond, two FTX customers, submitted an emergency motion on Thursday to delay Friday's hearing in response to latest revelations from former top FTX attorney Daniel Friedberg, who opposed FTX hiring Sullivan & Cromwell, citing similar conflicts of interest.
Friedberg said that Miller had told him "it was very important for him [Miller] personally to channel a lot of business to S&C as he wanted to return there as a partner after his stint at the debtors."
Miller didn't immediately respond to a request for comment.
The complaints about Sullivan & Cromwell echoes those made by FTX’s founder, Sam Bankman-Fried, last week. In a blog post, Bankman-Fried said Sullivan & Cromwell's relationship with FTX prior to the crypto exchange's downfall was more than purely transactional and that the law firm's staff had pressured him into filing for bankruptcy in November.
Friedberg also said that Sullivan & Cromwell has repeatedly refused to waive his attorney-client privilege in order to help law enforcement and that this is "totally inappropriate."
John Ray III, FTX's current CEO, however supports the defunct exchange hiring Sullivan & Cromwell, saying in December that it "is one of the leading law firms in the world in all of the key practice areas.”
In a fresh declaration, Ray said if the retention of the lawyers were to be denied "the interest of the debtors’ customers and creditors, as well as the state and federal regulators and prosecutors with whom these advisors engage on a daily basis, would be severely, if not irreparably harmed."
A spokesperson for Sullivan & Cromwell referred to a statement from Andrew Dietderich, an attorney at the firm, on Jan. 17 without further comment. In the statement, Dietderich said that Bankman-Fried's claim that Sullivan & Cromwell had pressured FTX into filing for bankruptcy was "false."
UPDATE (Jan. 20, 2023, 14:00 UTC): Removes second "FTX" from headline. Adds response from Sullivan & Cromwell spokesperson.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.