FTX Finally Gets Court Approval For This Despite Much Controversy

The judge presiding over the FTX Group bankruptcy case declined to appoint a different legal team to handle the Chapter 11 lawsuit for the insolvent crypto exchange; deciding that last-minute criticism of the attorneys were just “rumors”. The ruling, which was handed down by Judge John T. Dorsey on Friday morning, was made in spite of the recent controversy around the possibility that the high-powered law firm had potential conflicts of interest with regard to the case.

Sullivan & Cromwell Gets Green Signal

Two creditors of FTX have accused the law firm of Sullivan & Cromwell of having a conflict of interest in the matter due to the fact that a former partner of the company worked as a leading in-house lawyer for FTX. These creditors are being represented by a law firm, which has initiated legal action against Sam Bankman-Fried, the founder of FTX, as well as other corporate leaders.

During the hearing in Wilmington, Delaware, Dorsey was quoted as saying:

There is no evidence of any actual conflict here. The document is certainly not something I’d allow to be submitted into the evidence in any event.

On Thursday afternoon, former FTX compliance officer Dan Friedberg, who was involved in the Ultimate Bet poker disaster that occurred in 2008, issued a last-minute affidavit against Sullivan & Cromwell. Marshal J. Hoda, who has been representing the FTX creditors, submitted a request to Dorsey asking that Friedberg be allowed to testify via a Zoom call. The judge stated that the witnesses had to be physically present in the courtroom, hence could not grant the request.

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Rumors Put To Rest

According to the documents submitted to the court, FTX paid Sullivan & Cromwell $8.5 million for their services on 20 separate cases. Sullivan & Cromwell was a law firm that both FTX General Counsel Ryne Miller and FTX lawyer Tim Wilson worked for in the past. Mr. Miller was a partner at Sullivan & Cromwell, while Mr. Wilson was an associate there. Sullivan & Cromwell has announced that it will not investigate any matters that involve the firm or any of its former partners or associates; instead, it will delegate the investigation to another law firm.

In significant Chapter 11 cases like the one involving FTX, judges rarely remove law firms from the case unless there is conclusive demonstration that the attorneys involved have a direct conflict of interest that cannot be resolved. Once worth $32 billion, FTX’s market cap plummeted due to a liquidity shortage & Sam Bankman-Fried, the founder, is being charged with fraud in a separate case.

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