January 28, 2023

FTX lawyers accuse Sam Bankman-Fried of ‘assault via Twitter’

FTX’s lawyers have accused Sam Bankman-Fried of trying to derail his crypto empire’s bankruptcy process with an “attack via Twitter.”

In recent weeks, Bankman-Fried has accused Sullivan & Cromwell, the law firm representing FTX in its Chapter 11 proceedings, in several tweets and blog posts of pressuring her to force companies, including FTX’s U.S. arm, into bankruptcy. The former billionaire’s claims have been dispelled. The company has denied those claims.

James Bromley, a partner at Sullivan and Cromwell, told a court hearing on Friday that the firm was “fighting a demon” in trying to deal with public criticism of Bankman-Fried. Its share Represented FTX in bankruptcy without being able to try him in court.

“One of the things that debtors typically face in these cases is an attack from Twitter,” Bromley said.

The bankruptcy court considered a request from two FTX clients who sought to block Sullivan’s appointment because of what they said were conflicts of interest created by the firm’s past work for the crypto group.

Ultimately, the judge rejected the petition. “There is no evidence of an actual conflict here,” said Judge John Dorsey.

The decision paves the way for Sullivan to seek millions of dollars in fees representing FTX as it attempts to repay account holders. Dorsey noted that FTX has hired other law firms that can be called in if any conflicts arise.

The investigation and Bromley’s comments show how the high-profile FTX case and the social media storm surrounding it could complicate efforts to reorganize the crypto exchange and recoup money owed to millions of creditors.

Another former FTX insider, its top attorney Dan Friedberg, on Thursday made new allegations against Sullivan in a last-minute court filing before the trial, citing conflicts of interest. The judge described the filing as “questioning, speculation and hearsay” and “not something I would allow to be admitted into evidence”.

Earlier this week, Sullivan filed dozens of pages more detailing the nearly $10mn worth of legal work it did for Bankman-Fried’s companies before it entered bankruptcy protection last year. Both former Sullivan attorneys held senior legal positions at FTX.

Bromley said on Friday that the company should have been more forthcoming from the start in disclosing the extent of its past ties to the failed crypto group. “In retrospect, your honor, we should have gone further in the original notification,” he told the court.

He added that Bankman-Fried, who has pleaded not guilty to US fraud charges, and other insiders who “brought the company to its knees” were concerned about the information Sullivan was providing to prosecutors and regulators.

“They can throw stones at the debtors’ lawyer who gives information to the lawyers,” he said.

The US Department of Justice objected to the company’s initial disclosure of its work for FTX, and pressed for more information. Prosecutors for the government on Friday said they were satisfied with the additional details provided by Sullivan.

Sullivan and Bankman-Fried declined to comment.

Separately on Friday, US prosecutors confirmed the seizure of around $700mn worth of cash and stock from Bankman-Fried, including $500mn worth of shares in trading platform Robinhood.

The pull, described in a court filing, also involved funds in three accounts at cryptocurrency exchange Binance, the values ​​of which were not disclosed.

The seizures occurred over the past few weeks while Bankman-Fried was under house arrest in California after being released on $250 million bond, the government revealed. He faces eight criminal charges.