Regulation Corporations
Sullivan & Cromwell pressured me to file for FTX chapter, crypto trade’s founder says
Indicted cryptocurrency trade FTX founder Samuel Bankman-Fried is accusing Sullivan & Cromwell of pressuring him to hunt chapter safety for his firm and submitting paperwork nominating a brand new CEO after he tried to withdraw permission.
Bankman-Fried claims that he obtained potential funding “to assist make clients complete” after he agreed to appoint restructuring specialist John Ray because the CEO. He tried to rescind the choice however was informed that it was too late, Bankman-Fried mentioned. Ray filed for Chapter 11 chapter safety and appointed Sullivan & Cromwell because the authorized counsel.
Bankman-Fried made these allegations in ready congressional testimony for Dec. 13 that was by no means delivered due to his arrest the day earlier than. Forbes printed the testimony here (out there in searchable type here) and summarized “the 11 juiciest elements” here.
The Wall Street Journal and Law.com adopted with tales.
The U.S. authorities is accusing Bankman-Fried of touting FTX Buying and selling as a secure platform for crypto asset buying and selling whereas diverting investor cash to his privately held hedge fund. FTX filed for bankruptcy Nov. 11 after a run on deposits uncovered $8 billion in lacking buyer funds, in line with earlier reporting by the New York Occasions.
Bankman-Fried was charged with fraud and conspiracy affecting clients and lenders.
Bankman-Fried’s testimony mentioned strain to shortly file for Chapter 11 chapter got here from Sullivan & Cromwell, one in every of FTX’s main exterior legislation corporations, and one in every of its former companions, FTX U.S. general counsel Ryne Miller, in line with Bloomberg Regulation.
Bankman-Fried mentioned he had 19 pages of screenshots exhibiting the strain to file.
“They vary from adamant to mentally unbalanced,” Bankman-Fried mentioned within the testimony. “In addition they referred to as a lot of my associates, co-workers and relations, pressuring them to strain me to file, a few of whom had been emotionally broken by the strain. A few of them got here to me crying.”
In accordance with Bankman-Fried, Sullivan & Cromwell selected Ray, who was well-known for his work on the Enron chapter property, to run the Chapter 11 group. Within the early-morning hours of Nov. 10, Bankman-Fried mentioned, he clicked on a DocuSign hyperlink nominating Ray as the company CEO “towards my higher judgment.”
“Lower than 10 minutes later, I acquired a possible funding supply for billions of {dollars} to assist make
clients complete,” Bankman-Fried claimed. “A couple of minutes thereafter, I instructed my counsel to rescind the doc; it had change into clear to me that it was not one of the simplest ways ahead. … My counsel knowledgeable me a couple of minutes later that it was too late,” Bankman-Fried mentioned.
Bankman-Fried mentioned Ray filed for Chapter 11 for all FTX entities, “together with a completely solvent U.S. entity, FTX U.S.”
Sullivan & Cromwell’s media relations division didn’t instantly reply to the ABA Journal’s request for remark, made by e mail and voicemail.
