1 year ago
FTX’s erstwhile main regulatory bureau Daniel Friedberg submitted an objection to the retention of instrumentality steadfast Sullivan & Cromwell (S&C) successful the exchange’s bankruptcy lawsuit connected Jan. 19.
Friedberg besides served arsenic FTX.US’ main compliance officer.
Friedberg alleged unethical behaviour connected the portion of FTX US wide counsel Ryne Miller. Friedberg alleged that Miller channeled concern to S&C, wherever Miller was formerly a partner. Friedberg said successful the declaration:
“Mr. Miller informed maine that it was precise important for him personally to transmission a batch of concern to S&C arsenic helium wanted to instrumentality determination arsenic a spouse aft his stint astatine the Debtors.”
This “bothered” Friedberg who advised Miller to lone prosecute the “best” extracurricular counsel. Friedberg informed Miller that his allegiance was present to FTX US and not S&C, arsenic per the tribunal filing.
However, Miller engaged S&C successful respective ineligible matters concerning FTX.US, the filing said. S&C served arsenic the superior counsel for FTX US, and FTX Derivatives, successful galore cases. The instrumentality steadfast besides served arsenic idiosyncratic counsel to FTX laminitis Sam Bankman-Fried (SBF) and erstwhile FTX engineering main Nishad Singh.
Friedberg added:
“Mr. Miller often reminisced that his mentors astatine S&C were partners Andrew G. Dietderich and Mitchell Eitel, and that helium would bash thing to assistance those partners.”
The declaration further stated that S&C represented antithetic FTX entities simultaneously, without decently waiving struggle of interest. It is important that the lawyers successful the FTX bankruptcy lawsuit are “independent and not person a past of representing each of the assorted groups and the principals astatine 1 time,” Friedberg noted.
Furthermore, Friedberg said that erstwhile helium learned of the $8 cardinal lawsuit plus shortage connected Nov. 7, helium approached Miller. At the time, Miller was engaged contacting “all the billionaires that helium knew” to assistance SBF rise exigency funds to capable the deficit.
Friedberg said helium told Miller to “review his ethical obligations” earlier continuing to correspond FTX.US but Miller allegedly “dismissed” Friedberg’s concerns, the filing noted.
A mates of days later, Friedberg informed Miller that each FTX retained instrumentality firms person suggested that FTX International and Alameda Research should record for bankruptcy extracurricular the U.S. However, Miller insisted that the bankruptcy cases beryllium filed successful the U.S. truthful that S&C could correspond the firms.
Friedberg further told Miller that FTX.US should not record for bankruptcy since it had capable resources. However, Miller said that FTX’s U.S. concern had to beryllium portion of the bankruptcy lawsuit since it “had the currency to wage S&C its retainer.”
Miller added that helium was transferring $200 cardinal from FTX Derivatives to S&C which would instrumentality attraction of the ineligible costs of the bankruptcy.
As per the declaration, Friedberg was “horrified” and tried to punctual Miller that “he was stealing further funds from customers” but Miller hung up the phone.
Allegations of misconduct against Sullivan & Cromwell
According to Friedberg, a lawyer from S&C made a mendacious connection to him and violated the New York codification of ethics. The S&C lawyer successful question informed Friedberg that S&C was representing each FTX entities and each assets were being combined.
Friedberg informed the S&C lawyer that determination were “unwaivable conflicts.” However, the S&C lawyer said the struggle rules did not use successful the bankruptcy discourse — which Friedberg claims is false.
Furthermore, Friedberg alleged that S&C breached “ethical obligations” and overbilled portion representing Alameda successful its recognition bid successful the Voyager bankruptcy. S&C allegedly sent a measure of $6.5 cardinal for its practice successful the Voyager bankruptcy case. Friedberg asked Miller to hole the occupation but Miller aboriginal authorized a outgo of $2.5 million, the declaration noted.
Friedberg besides alleged that S&C was aiding and abetting BlockFi to interruption the Securities Act portion acting arsenic BlockFi’s SEC counsel. He further claimed that S&C made respective mendacious statements and breached ethical boundaries aggregate times.
What happens next
The FTX bankruptcy lawsuit volition beryllium up for proceeding connected Jan. 20 to sermon the retention of S&C arsenic counsel. The SEC’s erstwhile main of the Office of Internet Enforcement John Reed Stark said:
“If the allegations acceptable distant successful the Friedberg filing are adjacent partially existent (despite Friedberg’s evident credibility issues), I cannot ideate immoderate condition wherever the FTX Trustee would beryllium allowed to prosecute Sullivan & Cromwell for immoderate purpose.”
Stark added that if the allegations are confirmed to beryllium existent then:
“Certain lawyers from Sullivan & Cromwell whitethorn beryllium called successful for DOJ proffers or, if appropriate, could adjacent look civil, regulatory oregon transgression liability.”
Financial services lawyer James Murphy said that if Friedberg is not contiguous astatine the hearing, S&C volition apt determination to onslaught the declaration arsenic hearsay. He added that if Friedberg shows up astatine court, “we could spot 1 heck of a cross-examination confrontation.”
The station Ex-FTX main regulatory serviceman alleges misconduct by S&C, Ryne Miller appeared archetypal connected CryptoSlate.
English (US) 