Objections Raised Over Appointment of Sullivan & Cromwell as Debtors’ Counsel for FTX

On Friday, bankruptcy justice John Dorsey approved the instrumentality steadfast Sullivan & Cromwell (S&C) to beryllium appointed arsenic the debtors’ counsel for FTX, contempt an objection from Daniel Friedberg, a erstwhile FTX US compliance officer. During a Zoom presentation, Friedberg claimed determination was a struggle of involvement betwixt erstwhile and existent FTX executives and FTX US’ wide counsel, arsenic Ryne Miller erstwhile worked for S&C. Judge Dorsey, however, was not swayed by Friedberg’s 17-page objection and appointed S&C, stating that “there’s nary grounds of existent struggle here.”

FTX Bankruptcy Raises Questions of Conflict of Interest and Odd Decisions

The time earlier bankruptcy justice John Dorsey approved Sullivan & Cromwell (S&C) to correspond the debtors arsenic ineligible counsel, James “Metalawman” Murphy published a Twitter thread explaining that it was unusual that S&C would apt beryllium chosen for FTX representation. “There’s thing disconnected with the FTX bankruptcy,” Murphy insisted successful his post. Murphy, an lawyer who specializes successful metaverse, Web3, and integer plus subjects, questioned the engagement of John J. Ray III, the caller FTX CEO and main restructuring officer, successful the process.

The lawyer Murphy points retired that erstwhile Ray worked with Enron arsenic the main restructuring officer, Ray did an fantabulous occupation aggressively pursuing recoveries for the payment of Enron’s creditors. However, Murphy said that Ray is acting precise otherwise from the hard-bargaining CEO helium was known arsenic astatine Enron and questioned this alteration successful attitude. For example, the metaverse lawyer elaborate that erstwhile helium was restructuring Enron, Ray ne'er suggested for a infinitesimal that 1 of Enron’s superior extracurricular instrumentality firms should service arsenic debtor’s counsel.

“Inexplicably, Mr. Ray present supports S&C’s determination to service arsenic debtors’ counsel,” Murphy noted. The lawyer further said that this is contempt S&C handling “20 engagements for FTX successful conscionable 16 months,” being “paid $8.5 cardinal successful fees,” and “representing cardinal figures [Sam Bankman-Fried] and [Nishad Singh] personally.” Murphy remarked that astatine Enron, Ray “aggressively pursued claims against Enron’s extracurricular instrumentality firms.” The lawyer continued:

Vinson & Elkins paid $30 cardinal to settee and Andrews Kurth paid $18.5 million. According to an autarkic report, these firms failed to respond to reddish flags suggesting imaginable misconduct.

Murphy besides opined that the eventual irony of this concern is that the tremendous fees volition beryllium paid by the victims of the FTX fraud — the customers. “My prediction: The unified beforehand of Mr. Ray, the Official Creditors Committee, and S&C volition prevail, and the justice volition name Sullivan & Cromwell debtors’ counsel … This is not normal,” Murphy concluded. During the proceeding the adjacent day, Daniel Friedberg, a erstwhile FTX US compliance officer, objected to S&C being appointed and submitted a 17-page objection for the bankruptcy justice to review. In the filing, the erstwhile FTX US compliance serviceman said that Ryne Miller, FTX US’ wide counsel, was once employed by S&C.

“Mr. Miller informed maine that it is 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 with the debtors,” Friedberg’s ailment details. Despite the objection, Bankruptcy Judge Dorsey told tribunal participants that “there’s nary grounds of existent struggle here,” adding that it was “hearsay, innuendo, speculation, rumors, and surely not thing I would let to beryllium introduced into evidence.”

After S&C was appointed arsenic debtors’ counsel, James “Metalawman” Murphy added his 2 cents astir the decision. “As expected, the justice approves Sullivan & Cromwell arsenic debtors’ counsel. Judge says, connected the grounds earlier him, helium has nary interest astir S&C conflicts of interest,” Murphy wrote. “Any suspense astir this determination was eliminated erstwhile the U.S. Trustee switched presumption to favour S&C’s appointment.” The aforesaid day, U.S. national prosecutors seized astir $700 cardinal successful assets from the disgraced FTX co-founder Bankman-Fried.

What bash you deliberation astir the assignment of Sullivan & Cromwell arsenic debtors’ counsel for FTX and the allegations of struggle of involvement raised by erstwhile FTX US compliance serviceman Daniel Friedberg and James “Metalawman” Murphy? Share your thoughts successful the comments below.

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