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FTX Creditors File Class-Action Lawsuit Against Sullivan & Cromwell
FTX creditors have filed a class-action lawsuit against the law firm overseeing the exchange’s bankruptcy, Sullivan & Cromwell (S&C). The creditors allege that S&C actively participated in FTX Group’s multibillion-dollar fraud and benefited financially from it. According to court filings on February 16, FTX creditors claim that S&C had knowledge of FTX US and FTX Trading Ltd.’s fraudulent conduct and misappropriation of funds belonging to class members. The class-action lawsuit seeks damages on several counts, including civil conspiracy, aiding and abetting fraud, and aiding and abetting fiduciary breaches.
S&C’s Previous Involvement with FTX
Sullivan & Cromwell, a century-old law firm, has been overseeing the FTX bankruptcy proceedings. It has had a previous working relationship with FTX, serving as outside counsel in various deals, such as FTX’s asset bid for Voyager Digital Holdings and the acquisition of LedgerX. The law firm received significant payments for its services. In the current bankruptcy case, S&C’s fees are estimated to reach hundreds of millions of dollars.
Allegations Against Ryne Miller and Sam Bankman-Fried
The connection between FTX and Sullivan & Cromwell was established through Ryne Miller, a former partner at S&C who joined the FTX Group as general counsel in August 2021. It is alleged that Miller redirected at least 20 cases from FTX to his former law firm. Former FTX chief regulatory officer, Daniel Friedberg, stated in a court filing that Miller expressed the importance of channeling business to S&C as he intended to return there as a partner after his time at FTX. The complaint also highlights the close relationship between former FTX CEO Sam Bankman-Fried and S&C, noting that Bankman-Fried often worked in the law firm’s New York offices.
Response from Sullivan & Cromwell
In response to the allegations, a spokesperson for Sullivan & Cromwell has denied any wrongdoing. The spokesperson said that the firm had never served as primary outside counsel to any FTX entity and had only a limited and transactional relationship with FTX and its affiliates prior to the bankruptcy.
Scrutiny and Appointment as Independent Monitor for Binance Holdings
S&C’s potential conflict of interest in the bankruptcy case had previously drawn scrutiny. In January 2023, a bipartisan group of US senators wrote to the judge, requesting an independent examiner, as they believed the law firm was not capable of uncovering the necessary information to ensure confidence in any investigation or findings. Meanwhile, S&C is also expected to be appointed as the independent monitor for Binance Holdings. The move comes after Binance reached a multibillion-dollar settlement with the US government. As part of the selection process, former federal prosecutor and firm partner Sharon Cohen Levin is set to lead the monitorship team.