Tuesday, May 21, 2024

FTX creditors sue bankruptcy law firm S&C alleging fraud involvement

FTX chapter case has unfolded to a brand new chapter because the alternate’s collectors have filed a class-action lawsuit in opposition to the regulation agency overseeing the case.

In a courtroom submitting on Feb. 16, FTX collectors alleged that regulation agency Sullivan & Cromwell, also referred to as S&C, “actively” participated within the “FTX Group’s multibillion greenback fraud,” asserting that the corporate benefited financially from FTX’s fraud.

“S&C knew of FTX US and FTX Buying and selling Ltd.’s omissions, untruthful and fraudulent conduct, and misappropriation of Class Members’ funds. Regardless of this information, S&C stood to realize financially from the FTX Group’s misconduct and so agreed, a minimum of impliedly, to help that illegal conduct for its personal acquire.”

The lawsuit seeks damages for a variety of counts, together with civil conspiracy, aiding and abetting fraud, and aiding and abetting fiduciary breaches.

Sullivan & Cromwell is the century-old regulation agency overseeing the FTX chapter proceedings. Beforehand, the agency reportedly served as outdoors counsel to the alternate in a number of offers, together with FTX’s bid for the property of Voyager Digital Holdings and the acquisition of LedgerX, receiving vital funds for its providers. Within the present chapter case, S&C’s charges are estimated to reach hundreds of millions of dollars.

The connection between FTX and the regulation agency was solid by Ryne Miller, a former companion at S&C who joined the FTX Group as basic counsel in August 2021. Miller allegedly channeled at least 20 cases from FTX to his former regulation agency.

“Mr. Miller knowledgeable me that it was crucial for him personally to channel quite a lot of enterprise to S&C as he needed to return there as a companion after his stint on the Debtors,” said former FTX chief regulatory officer Daniel Friedberg in one other courtroom submitting.

The criticism additionally notes that former FTX CEO Sam Bankman-Fried would typically work in S&C’s places of work in New York, “so shut was the connection” between the businesses.

In a earlier assertion to Cointelegraph, a spokesperson for the regulation agency denied any wrongdoing, saying S&C had “by no means served as major outdoors counsel to any FTX entity” and had a “restricted and largely transactional relationship with FTX and sure associates previous to the chapter”.

S&C’s potential battle of curiosity with the chapter case has been scrutinized earlier than. In January 2023, a bipartisan group of United States senators wrote to the decide calling for an independent examiner, claiming the regulation agency was “not able to uncover the knowledge wanted to make sure confidence in any investigation or findings.”

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