Two Law Firms Played Key Roles in Sam Bankman-Fried’s House of Cards; One Is Now Collecting Upwards of $2,165 an Hour in FTX Bankruptcy Proceedings

Gunnar Larson g at
Tue Jan 3 08:25:34 PST 2023

By Pam Martens and Russ Martens: January 3, 2023 ~

Thus far, they are the “untouchables.” The law firms that were at the side
of Sam Bankman-Fried every step of the way as he built the FTX crypto
exchange — an enterprise that Justice Department prosecutor Damian Williams
calls “one of the biggest financial frauds in American history.”

Bankman-Fried, the former co-founder and CEO of FTX, has been indicted on
eight criminal counts and is wearing a monitoring device as he awaits
trial. Caroline Ellison, the former CEO of Bankman-Fried’s now bankrupt
hedge fund, Alameda Research, which prosecutors say looted FTX customers’
money, has pleaded guilty to a 7-count criminal indictment. Gary Wang, the
former Chief Technology Officer of FTX Trading Ltd., has pleaded guilty to
four criminal counts.

What’s happening to the lawyers and the law firms that played pivotal roles
in putting this house of cards together? Attorneys at one of those firms,
Big Law behemoth Sullivan & Cromwell, are set to collect “between $1,575
and $2,165 per hour for their work” in the bankruptcy proceedings for FTX,
according to Reuters.

Yes, despite its intimate role in helping to build the Sam Bankman-Fried
house of cards, Sullivan & Cromwell has somehow managed to become in charge
of the bankruptcy process of the collapsed firm. According to
Bankman-Fried’s draft testimony prepared for a House Financial Services
Committee hearing and released by Forbes, “Sullivan & Cromwell was one of
the primary external law firms that represented FTX US as well as FTX
International” and was calling the shots as the firm collapsed, including
picking the new CEO, John Ray. Bankman-Fried was arrested on the day he was
scheduled to testify and, thus, did not make it to the hearing to deliver
this testimony.

Based on the research of Wall Street On Parade, at the time of the FTX
bankruptcy filing on November 11, the General Counsel of FTX.US, the FTX
exchange serving customers in the U.S., was former Sullivan & Cromwell
partner, Ryne Miller, who had co-chaired the law firm’s commodities,
futures and derivatives group and worked at the law firm for eight years
prior to joining this upstart crypto exchange.

Another Sullivan & Cromwell partner involved with FTX was Ken Li, who
represented FTX.US last year in its acquisition of crypto derivatives firm,
LedgerX, which provides trading in crypto futures, options and swaps to
both retail and institutional clients.

Sullivan & Cromwell also represented both Alameda Research and FTX in their
joint bid to purchase the assets of bankrupt crypto exchange, Voyager
Digital Holdings, in 2021. While Sullivan & Cromwell’s website states that
it represented FTX.US in its winning bid, the filings in the court case
indicate that Sullivan & Cromwell lawyers Andrew G. Dietderich, Brian D.
Glueckstein, and Benjamin S. Beller were also representing Alameda
Research, Bankman-Fried’s hedge fund that is now alleged to have
misappropriated billions of dollars of customers’ funds from the FTX

Sullivan & Cromwell listed 16 of their attorneys that worked on the deal,
writing that: “The S&C team advising FTX US was led by Andy Dietderich and
Brian Glueckstein on restructuring matters and Mitch Eitel on financial
services matters. The team included Benjamin Beller, Mimi Wu, Christian
Jensen, Yuexin Zhu, Jessica Ljustina and Yiming Sun. Ryan Logan, Justin Orr
and Jamie Chang advised on intellectual property matters. Jameson Lloyd and
HyunKyu Kim advised on tax matters. David Gilberg and Colin Lloyd advised
on regulatory matters.”

With FTX and Alameda Research now in bankruptcy themselves, Voyager has
announced a new deal with Binance.US to acquire its assets.

Another law firm intimately involved in building Bankman-Fried’s house of
cards was Fenwick & West. We know its involvement with Alameda Research
dates back to at least 2019 because that is the year in which Fenwick &
West entered an appearance to represent Alameda Research in a federal
lawsuit alleging that FTX and Alameda had engaged in racketeering activity
and crypto market manipulation. The case was Bitcoin Manipulation Abatement
LLC v. FTX Trading LTD, Alameda Research LLC, et al and was filed in the
Federal District Court for the Northern District of California.

The lead attorney from Fenwick & West in the case was Michael Dicke.
Fenwick’s website explains that Dicke “routinely advises clients on
corporate governance and disclosure issues. Recently, he has focused on
emerging issues in the cybersecurity and cryptocurrency areas, including
advising companies and individuals seeking to launch an initial coin
offering and entities engaged in cryptocurrency trading.” Prior to joining
Fenwick, Dicke “spent over 15 years with the SEC, most recently serving as
the Associate Regional Director for Enforcement in the SEC’s San Francisco
regional office, from 2008 to 2014,” according to the Fenwick website.

Curiously, after the plaintiff filed an 89-page detailed complaint against
FTX, Alameda Research, Sam Bankman-Fried and others in early November 2019,
the plaintiff voluntarily dismissed his own case six weeks later.

While Fenwick & West has scrubbed much of its involvement with FTX from its
website, we were able to piece together the following:

According to the Global Legal Chronicle, Fenwick & West represented FTX on
its October 2021 $420 million Series B-1 capital raise and again on its
$900 million capital raise in July of last year.

According to veteran financial writer, Gretchen Morgenson, who now reports
for NBC, Fenwick & West drew up the incorporation papers for a company
called North Dimension, which was incorporated in Delaware in August 2020.
That’s the company where FTX customers were told to wire funds in order to
trade on FTX. Instead of the customer funds ending up at FTX, however, they
ended up at Bankman-Fried’s hedge fund, Alameda Research. The SEC has
charged in a complaint that Alameda then used the funds “indiscriminately
to fund its trading operations and Bankman-Fried’s other ventures.”

The new CEO of FTX, John Ray, told the House Financial Services Committee
on December 13 that $8 billion of FTX customers’ funds are missing.

Numerous other large law firms were involved with FTX and Alameda Research.
Some of those law firms are attempting to draw a dark curtain around those
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