US lawmakers call on court to approve 'independent examiner' in FTX bankruptcy case

Published at: Jan. 10, 2023

A group of four United States senators have criticized one of the law firms involved in the bankruptcy case of crypto exchange FTX for conflicts of interest.

In a Jan. 9 letter to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, Senators John Hickenlooper, Thom Tillis, Elizabeth Warren, and Cynthia Lummis — a bipartisan group — called on the judge to approve a motion appointing an independent examiner into FTX’s activities prior to its collapse in November. The U.S. lawmakers said Sullivan & Cromwell, the law firm currently tasked with the investigation, had previously provided legal services to FTX and “one of its partners even served as FTX’s general counsel” — a perceived conflict of interest amid the firm’s bankruptcy proceedings.

“The damage FTX and other mismanaged digital asset firms have caused is considerable: they have destroyed the life savings of tens of thousands of customers in the U.S. and all over the world,” said the letter. “We believe it is critical that a strong, objective, and disinterested examiner is appointed in this case to conduct a searching investigation of FTX, FTX US and its related entities in order to uncover the facts needed to assure FTX’s customers – and the broader public – that justice is served and to inform Congress’ consideration of future digital asset legislation.”

The senators added:

“Gven their longstanding legal work for FTX, [Sullivan & Cromwell] may well bear a measure of responsibility for the damage wrecked on the company’s victims. Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.”

Get this: FTX’s legal advisors *pre-collapse* want to be appointed to oversee investigations INTO the collapse.I’m no legal expert, but that sounds like a conflict of interest. With @SenThomTillis @SenWarren @SenLummishttps://t.co/iz3k9yP1uT

— Senator John Hickenlooper (@SenatorHick) January 10, 2023

FTX Group filed for Chapter 11 bankruptcy on Nov. 11, and former CEO Sam Bankman-Fried was charged with eight criminal counts in federal court in December. The next public hearing in FTX’s bankruptcy case is scheduled for Jan. 11, while Bankman-Fried's trial is expected to start in October.

U.S. authorities have targeted assets previously controlled by FTX and its executives, with the Justice Department announcing on Jan. 9 it had seized more than 55 million shares of Robinhood and more than $20 million in U.S. currency as part of the case against Bankman-Fried. Bankman-Fried, BlockFi and FTX creditor Yonathan Ben Shimon had each made separate claims on the assets.

Cointelegraph reached out to Sullivan & Cromwell, but did not receive a response at the time of publication.