The Delaware judge presiding over FTX’s bankruptcy case ruled today that Sullivan & Cromwell attorneys can represent FTX in its ongoing bankruptcy proceedings.
Judge John Dorsey dismissed a lawsuit previously filed by FTX clients stating that the firm’s previous work for FTX presented a conflict of interest in the current case.
FTX Attorneys and Sullivan & Cromwell Save Face
According to court documents, Sullivan & Cromwell previously represented FTX on 20 occasions.FTX attorneys Ryan Salame and Tim Wilson also had close ties to the firm.
But despite the former FTX chief’s subsequent compliance request on Jan.19, 2022, to bolster the “conflict of interest” objection, the judge said he could find no evidence that Sullivan & Cromwell had no such handicap.
“Potential conflicts” alone cannot prevent a law firm from litigating on behalf of a bankrupt company, Judge Dorsey ruled.
Bahamian exchange FTX filed for bankruptcy on November 11, 2022, after being unable to honor customer withdrawals after a Coindesk report revealed that a large percentage of its subsidiary Alameda Research’s balance sheet consisted of FTX’s relatively illiquid FTT token.At the same time, FTX’s former CEO, Samuel Bankman-Fried, also resigned.
Bankman-Fried later claimed that Sullivan & Cromwell pressured him to declare FTX bankrupt.
Insolvency expert John J.Ray III then took over as CEO and appointed investment bankers to sell off several FTX entities and venture capital investments to recoup client funds.
In addition, Ray floated the idea of restarting the exchange to get customers’ money back sooner than bankruptcy proceedings could.
A revised list of creditors from the FTX bankruptcy case revealed that the Bahamian company owes more than $200 million to Digital Currency Group-owned Genesis Global Capital, a major lender in the crypto space.
Genesis filed for bankruptcy earlier today, claiming it owes over $3.6 billion to its 50 largest unsecured creditors.
The lender suffered a liquidity crisis in November 2022 after crypto hedge fund Three Arrows Capital failed to default on a $2.4 billion loan.
The security of Bankman-Fried’s parents’ home is almost breached
Attorneys defending Bankman-Fried in a separate criminal case filed a letter with the presiding judge today, alleging that the three men ran into a metal barricade around Bankman-Fried’s parents’ home in Palo Alto, California.
According to attorneys Mark Cohen and Chris Everdell, the three men in the vehicle told designated security that they were determined to enter the home.
The unidentified persons later moved away.
The lawyers successfully asked the judge to withhold the names of unnamed guarantors who signed Bankman-Fried’s $250 million recognizance bond earlier this year to ensure their safety.
Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, were two famous guarantors.
The terms of the recognizance bond restrict Bankman-Fried’s movement within the United States and force him to wear an ankle tracking bracelet.In addition, mental health and addiction must be treated.
Bankman-Fried, a former multibillionaire, faces eight criminal charges in the US, including conspiracy to commit wire fraud, money laundering and violating political campaign finance laws.
The former FTX CEO has pleaded not guilty to all charges and is awaiting an October 2023 trial date.
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