Judge Criticizes Senators’ Letters Against FTX Bankruptcy Attorneys

The Delaware judge overseeing FTX’s bankruptcy case slammed four U.S. senators for what he called an “inappropriate” letter in which lawmakers questioned the role of law firm Sullivan & Cromwell as bankruptcy counsel for the failed crypto exchange asked.

The letter is “an inappropriate ex-parte communication,” Judge John Dorsey said in a hearing Wednesday in FTX’s Chapter 11 case. “It will not affect my decisions,” Dorsey said.

Four lawmakers, led by Sen. John Hickenlooper (D-Col.), argued in a Jan. 9 letter to Dorsey that the Wall Street law firm was not qualified for the role of FTX’s bankruptcy counsel because of its past work on behalf of the failed crypto exchange.

“Given their long history of legal work for FTX, they may bear some responsibility for the harm done to the company’s victims,” ​​the senators said. “The company is simply unable to uncover the information needed to ensure confidence in any investigation or outcome.”

The group, which also included Sens. Thom Tillis (R-NC), Elizabeth Warren (D-Mass.) and Cynthia Lummis (R-Wyo.), urged Dorsey to consider a U.S. trustee’s request for independent review Auditors to support activities that led to the FTX implosion.

Sullivan & Cromwell continued to receive approximately $8.5 million from FTX and other related companies in the 16 months before the stock market collapse for work primarily related to transactions and regulatory investigations, its December filing shows to remain legal counsel.

The firm added in that filing that it received a $12 million advance from an FTX-controlled entity to handle the early phase of the Chapter 11 case.

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Prior to his arrest, former FTX leader Sam Bankman-Fried planned to testify before Congress that the firm was a “primary outside counsel” for certain FTX entities and that it was pressuring to file for Chapter 11, according to a leaked transcript his preparation remarks.

Sullivan & Cromwell said in a statement Tuesday that they have never served as the primary outside advisor to an FTX company.

“The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy,” the firm said in a statement.

Dorsey is yet to consider Sullivan & Cromwell’s request to remain as counsel for FTX in the bankruptcy proceedings.

Warren Winter, an FTX creditor who claims to have lost hundreds of thousands of dollars after the stock market collapse, has also objected to the firm’s role in the case. Winter said in an amended motion filed on Tuesday that a number of conflicts — including the fact that former Sullivan & Cromwell attorneys Ryne Miller and Tim Wilson are now senior in-house counsel for FTX firms — should prevent the firm from doing so to act as bankruptcy adviser.

FTX and more than a hundred of its subsidiaries filed for bankruptcy in November, listing at least $10 billion in assets and liabilities. Bankman-Fried faces criminal charges over alleged misuse of billions of dollars in FTX customer funds.

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