Sullivan & Cromwell Denies Complicity in FTX Fraud, Seeks Lawsuit Dismissal

Sullivan & Cromwell has rejected claims that it was complicit in a billion-dollar fraud involving the failed crypto exchange FTX. The law firm has asked a federal judge to dismiss the lawsuit brought by FTX investors, labeling it as “innuendo masquerading as facts.”

Sullivan & Cromwell Denies FTX Fraud Lawsuit

In a recent court filing, Sullivan & Cromwell argued that the lawsuit against them is unfounded. The firm emphasized that the investors behind the lawsuit are already set to receive compensation through FTX bankruptcy proceedings. Sullivan & Cromwell stated that these claims are redundant as the plaintiffs are seeking damages that will be covered by the ongoing bankruptcy process.

Sullivan & Cromwell was retained by FTX in the 16 months leading up to its collapse in November 2022. Despite their involvement with the exchange, the firm highlighted that no direct accusations of fraud have been made against them. They pointed out that providing legal services to a client does not imply knowledge or complicity in any fraudulent activities.

Sullivan & Cromwell has been instrumental in guiding FTX through its Chapter 11 restructuring in Delaware. The firm has billed over $180 million for its work over the past 18 months. The firm has called the bankruptcy proceedings a “tremendous success,” noting that FTX has secured sufficient funds to compensate all defrauded customers.

On May 8, FTX announced that it had collected more than enough to cover the losses of its customers. Creditors are expected to receive full recoveries based on the value of their crypto assets at the time of the bankruptcy, plus interest. This development supports Sullivan & Cromwell’s argument that the bankruptcy process will adequately compensate the investors, making the lawsuit unnecessary.

Controversy Costs Sullivan & Cromwell Binance Assignment

The lawsuit against Sullivan & Cromwell is part of a broader scrutiny of third-party advisers and celebrity endorsers who were allegedly involved with FTX. The Moskowitz Law Firm, representing a proposed class of investors, accused Sullivan & Cromwell of aiding and abetting fraudulent activities at FTX. This has led to a court-mandated review to determine if any conflicts of interest should have been addressed during the bankruptcy proceedings.

The controversy surrounding Sullivan & Cromwell’s work for FTX has already impacted the firm. Due to the ongoing scrutiny, it lost a high-profile assignment as an outside monitor for the crypto exchange Binance.

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