FTX Bankruptcy: Law Firm Accused of Fraud

FTX Creditors Sue Law Firm

FTX creditors have filed a lawsuit against Sullivan & Cromwell (S&C), the law firm handling the exchange’s bankruptcy proceedings. They accuse S&C of helping FTX commit fraud.

S&C’s Ties to FTX

S&C’s relationship with FTX began in 2021 when FTX hired a former S&C employee as its general counsel. This employee helped build the relationship between FTX and S&C, which provided legal services on various matters, including regulatory issues and acquisitions.

S&C’s Knowledge of FTX’s Activities

The lawsuit alleges that S&C was aware of FTX’s questionable activities, such as using customer deposits to acquire LedgerX. Despite this knowledge, S&C continued to represent FTX in deals, vouching for its financial health and compliance.

Charges Against S&C

The creditors accuse S&C of aiding and abetting fraud and fiduciary fraud. They are seeking compensation for damages and a jury trial.

Scrutiny of S&C’s Bankruptcy Role

The lawsuit raises concerns about S&C’s role as the bankruptcy handler, as it requires independence and impartiality.