Various Parties have objected to the retention of Sullivan and Cromwell as lead counsel to FTX, refering to conflicts of Interest and lacking disclosures.
The CEO of Crypto exchange FTX has dismissed requires its law office to be replaced as lead counsel in its bankruptcy case.
John J. The new FTX CEO is Ray III. 11, filed a court motion on Jan. 17 contending that Sullivan and Cromwell has been essential in assuming command of the “dumpster fire” that was given to him.
Ray suggested that holding their services is to the greatest advantage of FTX creditors, contending:
“The advisors are not the villains in these cases. The villains are being sought after by the appropriate criminal authorities to a great extent because of the information and backing they are getting at my course from the Debtors’ advisors.”
U.S. Legal administrator Andrew R. Vara had filed an objection to the retention of the law office on Jan. 14, refering to two separate issues.
He claimed that Sullivan and Cromwell had failed to sufficiently disclose its connections and earlier work for FTX. He also brought up that based on publicly accessible knowledge, a former partner of the law office turned into a counsel to FTX 14 months before the bankruptcy filing.
In the mean time, lawyer James A. Murphy, who goes by the Twitter handle MetaLawMan, suggested on Jan. 14 that the earlier work it had accomplished for FTX was not the law office’s just conflict of interest in the case.
He claimed that private equity firm Apollo Global has been buying up creditor claims from FTX customers for a negligible part of their value. Murphy noticed that Apollo’s executive, Jay Clayton, is also employed by Sullivan and Cromwell, which has access to delicate financial information.
The U.S. Trustee also trusted that the ongoing application to hold Sullivan and Cromwell was flawed, as they would “usurp” an independent examiner’s work and the parties would copy their services at the expense of the FTX estate.
The appointment of an independent examiner was called for by the Trustee. 1, highlighting a part of the bankruptcy code that mandates the appointment of an examiner when certain debts surpass $5 million.
On Jan. 10, a bipartisan group of four U.S. representatives sent a letter to Delaware bankruptcy judge John Dorsey, mentioning that he approve the motion to hire an independent examiner and expressed their mistrust that the law office could be marked as a “disinterested” party.
Dorsey, however, named the letter as “inappropriate ex parte communication,” and said he wouldn’t take it into account when he decides whether to select an independent examiner or approve the retention of Sullivan and Cromwell.
Yet, Dorsey is set to consider the objection of a FTX creditor filed on Jan. 10 while choosing whether Sullivan and Cromwell should be held, with the creditor also proposing that the law office’s past work for FTX constitutes a conflict of interest.