A filing submitted yesterday to the bankruptcy court handling FTX has questioned the involvement of Sullivan & Cromwell as the bankruptcy counsel. The document claims that:
“Sullivan & Cromwell is not only an inappropriate candidate for appointment as the FTX Group’s bankruptcy counsel—it is a target for investigation with its own potential liability.”
Describing the relationship as “the most flagrant attempt by a fox to guard a henhouse in recent memory,” the document asks the court to deny Sullivan and Cromwell’s attempt to act as counsel to FTX. The document shares that the FTX Group has paid Sullivan and Cromwell more than $20.5 million in fees and retainers to date – mostly prior to the failure of FTX. It is also noted that two former Sullivan & Cromwell lawyers were installed as General Counsel of FTX US and FTX Ventures, attempting to display a conflict of interest.
The filing received a bit of a boost when a group of four US Senators sent a letter to the court objecting to the involvement of Sullivan and Cromwell. Led by Senator John Hickenlooper, he was joined by Senators Thom Tillis, Elizabeth Warren, and Cynthia Lummis. The bipartisan group represented both sides of the crypto fence as Senator Lummis is well known for her support of digital assets, and Senator Warren has long been critical of the industry.
The Senators state:
“we believe it is critical that a strong, objective, and disinterested examiner is appointed in this case to conduct a searching investigation of FTX, FTX US and its related entities in order to uncover the facts needed to assure FTX’s customers – and the broader public – that justice is served and to inform Congress’ consideration of future digital asset legislation.”
They then question the involvement of Sullivan and Cromwell as they have advised FTX for years and now they are poise to conduct investigations of fraud and criminal actions of the same firm they provided legal advice prior to the failure of FTX.
The letter says:
“… significant questions about the firm’s involvement in the operations of FTX remain unanswered, including the extent to which Sullivan & Cromwell attorneys had questions or suspected fraud or the absence of appropriate legal controls, the actual scope of Sullivan & Cromwell’s representation of FTX and if not Sullivan & Cromwell, which law firm actually served as “primary external counsel” to the Debtors.”
The Senators urged the court to support the motion to deny Sullivan and Cromwell’s involvement.