Investigation reveals no wrongdoing in hiring Sullivan & Cromwell for FTX bankruptcy case

In a recent court-ordered investigation into FTX’s bankruptcy, Wall Street law firm Sullivan & Cromwell has been largely absolved of any disqualifying conflicts of interest that could have compromised its restructuring advice to the collapsed cryptocurrency exchange. The investigation, led by former federal prosecutor Robert Cleary, found no evidence to suggest that Sullivan & Cromwell should have been aware of FTX founder Sam Bankman-Fried’s alleged looting of customers’ assets before the exchange’s bankruptcy filing.

Despite initial objections from the Department of Justice regarding Sullivan & Cromwell’s ties to FTX, the law firm was ultimately retained for the bankruptcy proceedings. However, some FTX accountholders raised concerns about the firm’s alleged conflicts of interest, with two prominent law professors claiming that Sullivan & Cromwell’s conflicts “permeated” FTX’s bankruptcy.

Cleary’s report recommended further inquiry into two pre-bankruptcy transactions involving Sullivan & Cromwell, including Bankman-Fried’s purchase of shares in Robinhood. While there is no concrete evidence to support the allegations against the law firm, Cleary noted that the issue had not been fully investigated.

Bankman-Fried, who has since been sentenced to 25 years in prison for fraud, criticized Sullivan & Cromwell for downplaying its relationship with FTX before the bankruptcy. However, the law firm maintains its confidence in its prepetition work for FTX and the handling of the Chapter 11 cases.

Despite the controversy surrounding Sullivan & Cromwell’s involvement, FTX accountholders can expect to recover more than 118 cents on the dollar for their claims based on the asset recovery efforts by the debtor. The investigation sheds light on the complexities and challenges faced in the aftermath of FTX’s collapse, highlighting the importance of transparency and accountability in the legal and financial sectors.