Bankruptcy Law Expert, Senator Elizabeth Warren, Asks FTX Bankruptcy Judge to Boot Sullivan & Cromwell from the Case

Gunnar Larson g at xny.io
Wed Jan 11 08:17:26 PST 2023


https://wallstreetonparade.com/2023/01/bankruptcy-law-expert-senator-elizabeth-warren-asks-ftx-bankruptcy-judge-to-boot-sullivan-cromwell-from-the-case/


By Pam Martens and Russ Martens: January 11, 2023 ~

Senator Elizabeth Warren Grilling Fed Chairman Jerome Powell at September
28, 2021 Senate Banking Hearing
Senator Elizabeth Warren

In what is likely a first of its kind effort, four sitting U.S. Senators,
including former Harvard Law Professor Elizabeth Warren, who is a
bankruptcy law expert, have asked the Judge overseeing the bankruptcy
proceedings of collapsed crypto exchange, FTX, to dump the Big Law firm of
Sullivan & Cromwell as the lead law firm in the case because of its
conflicts of interest in the matter. The case has garnered international
media attention because more than $8 billion of customers’ money is said to
be missing and the fact that high profile U.S. sports figures and
celebrities promoted the company.

On Monday, Senator Warren (D-MA) joined Senator John Hickenlooper (D-CO)
along with Republican Senators Thom Tillis (R-NC) and Cynthia Lummis (R-WY)
in a letter outlining the conflicts to Judge John Dorsey of the U.S.
Bankruptcy Court for the District of Delaware.

The political news website, Punchbowl News, broke the story of the
Senators’ letter yesterday morning. Hickenlooper then gave the story more
momentum by Tweeting a link with the comment: “Get this: FTX’s legal
advisors *pre-collapse* want to be appointed to oversee investigations INTO
the collapse.”

The Senators’ letter includes this blunt assessment of Sullivan &
Cromwell’s conflicted role:

“To name just one challenge: will the firm’s lawyers be able to effectively
investigate their current and former partners who were central in FTX’s
conduct? Additionally, given their longstanding legal work for FTX, they
may well bear a measure of responsibility for the damage wrecked on the
company’s victims. Put bluntly, the firm is simply not in a position to
uncover the information needed to ensure confidence in any investigation or
findings.”

Yesterday, another objector to Sullivan & Cromwell serving as lead law firm
in the bankruptcy proceedings filed an amended objection with a scathing
assessment of the law firm’s conduct. The objector is Warren Winter, a man
described by his attorneys as “a United States citizen residing abroad” who
had “several hundred thousand dollars of assets in his FTX account when the
exchange collapsed, which he has since been unable to access.”

The amended objection made the following points, among numerous others, to
the bankruptcy court:

“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. Its appointment as counsel would endanger the
estate and create a rigged game, undermining creditors’ and the public’s
faith in the bankruptcy process. The Court should therefore reject Sullivan
& Cromwell’s application and disqualify it from appointment as Debtors’
counsel.”

And this:

“Two former Sullivan & Cromwell lawyers are General Counsel to FTX Group
entities. Sullivan & Cromwell did not disclose these connections in its
Application and therefore violated Federal Rule of Bankruptcy Procedure
2014, which requires a statement ‘all of [the firm’s] connections with the
debtor … [and the debtor’s] attorneys.’ What’s more, disclosed or not,
these connections create a conflict of interest and are disqualifying. FTX
US General Counsel Ryne Miller is a former partner at Sullivan &
Cromwell…Miller is alleged to have played a key role— perhaps the key
role—in wresting control of the FTX Group from Sam BankmanFried and
directing this extremely valuable bankruptcy matter to his former firm.
According to Bankman-Fried, and supported by what appears to be genuine
evidence, Miller proclaimed to have usurped control of the FTX Group by
November 8th. He immediately secured a $12 million retainer for his former
firm and allegedly mounted an ‘extreme pressure’ campaign to put the FTX
Group into bankruptcy with Sullivan & Cromwell and its hand-picked CEO at
the helm.

“FTX Ventures General Counsel Tim Wilson is another former Sullivan &
Cromwell lawyer. The Securities and Exchange Commission has alleged that
FTX Ventures made at least $200 million in venture-capital investments
using customer funds that had been misappropriated through Alameda
Research….”

A hearing in the FTX bankruptcy case is scheduled for 8:55 a.m. this
morning. It is unclear as to what issues will be discussed today. A live
stream of the hearing is available on YouTube at this link.

Wall Street On Parade has been pointing out the myriad conflicts with
Sullivan & Cromwell since two days after the bankruptcy petition was filed
for FTX on November 11 of last year. Yesterday, we reported that Sullivan &
Cromwell was also currently serving as legal counsel to four of the largest
crypto exchange competitors to FTX. (See Related Articles below.)

Related Articles:

Sullivan & Cromwell, FTX Lead Counsel in Bankruptcy, Says It Has No Adverse
Relationships, Despite Representing Four of FTX’s Crypto Exchange
Competitors

Big Law Firm, Sullivan & Cromwell, Did Significant Legal Work for Bankrupt
Crypto Exchange, FTX

No One Trusts the FTX Bankruptcy Case: News Outlets Intervene; Justice
Department Trustee Demands Independent Examiner; SEC Orders Disclosures
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