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Swimsuit accuses Sullivan & Cromwell of using ‘inventive however deceptive methods’ that aided FTX fraud
A proposed class motion lawsuit filed by traders in cryptocurrency trade FTX accuses Sullivan & Cromwell of aiding and abetting fraud by offering authorized companies that went “effectively past” traditional authorized work. (Picture from Shutterstock)
A proposed class motion lawsuit filed by traders in cryptocurrency trade FTX accuses Sullivan & Cromwell of aiding and abetting fraud by offering authorized companies that went “effectively past” traditional authorized work.
“Because the proof will reveal, S&C legal professionals had been wanting to craft not solely inventive however deceptive methods that furthered FTX’s misconduct,” in accordance with the Feb. 16 suit, filed within the U.S. District Court docket for the Southern District of Florida.
Law.com, Bloomberg Law and Reuters have protection.
FTX founder Samuel Bankman-Fried was convicted in November 2023 on seven counts of fraud and conspiracy a 12 months after the collapse of his firm. One other legislation agency, Fenwick & West, can be facing a suit for its authorized work for FTX.
The brand new swimsuit that alleges Sullivan & Cromwell fashioned a detailed relationship with FTX U.S. as its outdoors counsel after the corporate employed agency companion Ryne Miller as its normal counsel in 2021. The connection between FTX and Sullivan & Cromwell was so shut that Bankman-Fried typically labored out of the agency’s New York workplace, the swimsuit says.
Whereas working as main authorized counsel over a 16-month interval, Sullivan & Cromwell billed about $8 million in charges, the swimsuit says. The agency was additionally employed to handle FTX’s chapter and has since earned greater than $180 million for FTX authorized issues.
FTX was in a position to keep away from the scrutiny of regulators such because the U.S. Commodity Futures Buying and selling Fee by shopping for corporations that already had the required licenses, the swimsuit says. The agency additionally generated for FTX entities “the looks of reputable operations; strict adherence to regulatory obligations; and esteem for authorized compliance, which permitted the scheme to develop in scale and persist in period,” the swimsuit alleges.
The swimsuit alleges civil conspiracy, aiding and abetting fraud, aiding and abetting breach of fiduciary obligation, and violation of the civil federal racketeering legislation.
The alleged RICO enterprise aimed to steer prospects to entrust FTX U.S. and FTX Buying and selling Ltd. with their belongings and to hide misappropriation of buyer funds, the swimsuit says. The agency supplied authorized recommendation “knowingly, recklessly or with willful blindness to the character of the RICO enterprise,” the swimsuit says.
Sullivan & Cromwell has previously said its relationship with FTX was restricted, and it reported issues when it realized of issues. It didn’t reply to requests for remark by Reuters, Regulation.com and Bloomberg Regulation. Nor did it instantly reply to an e mail request for remark by the ABA Journal.
The case is Garrison v. Sullivan & Cromwell.
The traders are represented by the Moskowitz Regulation Agency.
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