Former FTX Lawyer Opposes Hiring Sullivan & Cromwell for Bankruptcy
Individual objectors have sought to delay an FTX hearing in the United States Bankruptcy Court in the district of Delaware scheduled at 10:00 a.m. EST on Jan. 20.
The hearing is expected to be about whether FTX can retain the services of New York law firm Sullivan & Cromwell (S&C) amid allegations from the U.S. Trustee who also voiced objections to the hiring claiming potential conflicts of interest, in a Jan. 13 legal filing.
FTX’s General Counsel Ryne Miller previously worked at S&C for eight years, said Trustee Andrew Vara, a Department of Justice official, adding that this non-disclosure makes it "wholly insufficient to evaluate whether S&C satisfies the Bankruptcy Code’s conflict-free and disinterestedness standards."
However, objectors Warren Winter and Richard Brummond, submitted the emergency motion on Thursday for adjournment of the hearing in response to latest revelations from former top FTX attorney Daniel Friedberg, who opposed Sullivan & Cromwell's hiring citing similar conflicts of interest.
Friedberg revealed that Miller had told him "it was very important for him [Miller] personally to channel a lot of business to S&C as he wanted to return there as a partner after his stint at the Debtors."
Friedberg's filing also alleges that Mr. Miller stated he needed to include FTX.US as part of the bankruptcy because FTX.US had the cash to pay S&C its retainer.
The complaint echoes those made by the crypto exchange’s founder Sam Bankman-Fried last week. In a blog Bankman-Fried said S&C’s relations with FTX prior to its downfall had been more than purely transactional, and that its staff had pressured him into filing for bankruptcy on Nov. 11.
Friedberg also said that S&C has repeatedly refused to waive my attorney-client privilege in order to help law enforcement and that this is "totally inappropriate."
Retaining the law firm is “necessary and in the best interests of the Debtors and their estates and stakeholders,” John Ray, appointed FTX chief executive officer on Nov. 11, said in a Dec. 21 deposition. “S&C is one of the leading law firms in the world in all of the key practice areas.”
In a fresh declaration John Ray said if the retention of the lawyers was to be denied "the interest of the Debtors’ customers and creditors, as well as the state and federal regulators and prosecutors with whom these advisors engage on a daily basis, would be severely, if not irreparably harmed."
The objectors asked the hearing, due to start soon, to be delayed in view of these new “substantive, relevant allegations.”
A spokesperson for S&C referred CoinDesk to Andrew Dietderich’s declaration of January 17 without further comment.
Read More: DOJ Objects to FTX’s Choice of Lawyers, Citing Conflict of Interest
UPDATE (Jan. 20, 2023, 14:00 UTC): Removes second "FTX" from headline. Adds response from Sullivan & Cromwell spokesperson.