FTX lawyers accuse Sam Bankman-Fried of ‘assault by Twitter’
Lawyers for FTX have accused Sam Bankman-Fried of trying to disrupt the bankruptcy process of his crypto empire through an “assault by Twitter”.
In recent weeks, Bankman-Fried has in numerous tweets and blog posts accused Sullivan & Cromwell, the law firm representing FTX in its Chapter 11 proceedings, of putting him under pressure to rush the companies into bankruptcy, including the US arm of FTX, which the former billionaire claims was solvent. The firm has denied those claims.
James Bromley, a partner at Sullivan and Cromwell, said at a court hearing on Friday that the firm is “fighting a ghost” in trying to address Bankman-Fried’s public criticism about its role representing FTX in the bankruptcy without being able to question him in court.
“One of the things that the debtors have been facing generally in these cases is assault by Twitter,” Bromley said.
The comments came at a hearing in which the bankruptcy court considered a motion by two FTX customers who sought to block Sullivan’s appointment because of what they claimed were conflicts of interest generated by the firm’s past work for the crypto group.
The judge ultimately denied the motion. “There is no evidence of any actual conflict here,” judge John Dorsey said.
The decision paves the way for Sullivan to earn potentially millions of dollars of fees representing FTX as it attempts to repay account holders. Dorsey noted FTX had hired other law firms that could be called on if any conflicts arose.
The hearing, and Bromley’s comments, point to how the high-profile FTX case and social media storm around it will complicate the efforts to restructure the crypto exchange and return money owed to millions of creditors.
Another former FTX insider, its top lawyer Dan Friedberg, on Thursday levelled fresh accusations at Sullivan over alleged conflicts of interest in a last-minute court filing before the hearing. The judge described the filing as full of “hearsay, speculation and rumours” and “not something I would allow to be admitted into evidence”.
Earlier this week, Sullivan filed dozens of pages of extra detail on the almost $10mn worth of legal work it performed for Bankman-Fried’s companies before they were put into bankruptcy protection last year. Two former Sullivan lawyers also held senior legal posts at FTX.
Bromley on Friday said the firm should have been more forthcoming from the beginning in disclosing the extent of its past links to the failed crypto group. “In retrospect, your Honour, we should have gone further in the original declaration,” he told the court.
He also claimed Bankman-Fried, who has pleaded not guilty to US fraud charges, and other insiders who “brought the company to its knees” are concerned about the information Sullivan is providing to prosecutors and regulators.
“They can throw stones at debtors’ counsel who are providing information to prosecutors,” he said.
The US Department of Justice had objected to the firm’s initial disclosure of its work for FTX, and pushed for more information. Lawyers for the government on Friday said they were satisfied by the extra detail Sullivan had provided.
Sullivan and Bankman-Fried declined to comment.
Separately on Friday, US prosecutors confirmed they had seized roughly $700mn worth of cash and equities from Bankman-Fried, including more than $500mn worth of shares in the trading platform Robinhood.
The haul, detailed in a court filing, also includes funds contained in three accounts on the cryptocurrency exchange Binance, the values of which were not disclosed.
The seizures took place over the past few weeks, the government revealed, while Bankman-Fried was under house arrest in California after being released on a $250mn bond. He faces eight criminal charges.
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