An investigation cleared Sullivan & Cromwell LLP of knowing about the financial issues and fraud behind FTX’s collapse.
The law firm that presided over the FTX bankruptcy, Sullivan & Cromwell LLP, was found to have been unaware of the perilous financial conditions and underlying fraud that precipitated the demise of the once-thriving exchange, according to an independent investigation.
The investigation was led by former U.S. prosecutor Robert Cleary, who observed that although Sullivan & Cromwell attorneys did provide fraudulent statements on behalf of FTX, they did so without any knowledge of the falsehood.
Following the public disclosure of the investigation’s results, Sullivan & Cromwell issued the subsequent statement:
“Sullivan & Cromwell remains confident in our pre-petition work for FTX and the commencement of the Chapter 11 cases, and we welcome the examiner’s findings to date rejecting various baseless allegations about our work for FTX.”
The investigation was initiated in response to the extensive suspicion and condemnation of Sullivan & Cromwell by FTX creditors and clients seeking redress.
Upon being appointed to supervise the bankruptcy proceedings, the law firm encountered opposition from both former customers and concerned creditors of the platform. These individuals believed that the firm’s collaboration with FTX prior to the bankruptcy had compromised the legal entity’s credibility and impartiality.
FTX filed for Chapter 11 bankruptcy on November 17, 2022, in response to a sequence of concerning events that ultimately resulted in the complete collapse of the exchange.
After a week had passed since the infamous collapse, Binance initiated a non-binding agreement to purchase FTX and assume control of its daily operations.
A day after the acquisition was announced, the value of the FTT token plummeted from approximately $22 to $5.50 on the market.
Binance terminated the provisional agreement within twenty-four hours, attributing its decision to FTX’s financial situation, the comingling of customer funds, and reports of preliminary investigations by U.S. authorities into the widely used exchange.
The termination of the agreement exacerbated FTX’s downfall, stoking already pervasive concerns that the organization was operating under improper conditions.
A number of days following the proposition and subsequent retraction of the deal by Binance, media outlets started to report on the disappearance of approximately $1 billion in client assets from FTX. This caused additional runs on the exchange, as customers attempted to withdraw their funds from the disintegrating platform in a last-ditch effort.
