FTX Examiner Requests Inquiry Into Crypto Exchange’s Collapse
Julia Smith
Published: June 13, 2024 14:56 EDT
Robert Cleary, the appointed independent examiner overseeing investigations into FTX’s bankruptcy estate, has filed a motion to delve deeper into the relationship between Sullivan & Cromwell (S&C) and Sam Bankman-Fried (SBF), as well as the discrepancies in FTX.US’s balance sheet.
Sullivan & Cromwell’s handling of the bankruptcy estate has faced scrutiny due to the firm’s involvement in various transactions with the failed crypto exchange before its downfall. Cleary previously found no evidence of S&C’s knowledge of FTX’s fraudulent activities, misrepresentations to regulators, or turning a blind eye to warning signs. It was also concluded that S&C did not deceive Sam Bankman-Fried or breach ethical obligations.
Cleary is now looking to investigate whether Sullivan & Cromwell was aware of any misconduct at the exchange, including claims that the firm’s attorneys advised Bankman-Fried on acquiring over 55 million Robinhood shares. The aim is to determine if there were any conflicts of interest that should have been disclosed during S&C’s retention process.
The motion also states that Cleary’s investigation will seek to uncover any information related to FTX’s significant crypto fraud scheme that Sullivan & Cromwell may have advised on or been aware of.
Furthermore, the filing includes a request to identify the causes of certain “holes” in FTX’s balance sheet and explore potential resolutions. This investigation could reveal further misconduct or misuse of customer assets.
This latest development is part of Sullivan and Cromwell’s ongoing legal entanglement concerning Sam Bankman-Fried and potential conflicts of interest. Critics argue that the law firm, known for its high fees, played a dual role in advising SBF and managing its bankruptcy proceedings.
If approved, Cleary’s investigation is estimated to last 10 weeks and cost around $3 million. Bankman-Fried is currently serving a 25-year prison sentence for orchestrating the global digital asset scheme, while Wang’s sentencing is expected later this year.
