A class action lawsuit by investors of FTX is being brought against law firm Sullivan and Cromwell for its involvement in the $8 billion fraud, according to a February 16 Miami court filing.
The extensive filing alleges Sullivan and Cromwell should face a jury trial on five different counts for their part in the crypto scheme, including aiding and abetting crypto fraud.
Customers of FTX “Lost Everything,” New Lawsuit Alleges
“S&C provided services to the FTX Group entities that went well beyond those a law firm should and ordinarily provides,” the lawsuit reads. “As the evidence will reveal, S&C lawyers were eager to craft not only creative but misleading strategies that furthered FTX’s misconduct.”
The investors in the lawsuit are currently being represented by the Moskowitz Law Firm, which has already filed a separate class action lawsuit against fellow law firm Fenwick and West for their part in the now-infamous scam.
“While customers of FTX…lost everything, S&C was able to gain millions from the FTX fraud,” the lawsuit continues, noting that the law firm billed an estimated $8.5 billion in fees while serving “as primary legal counsel” to the doomed crypto exchange “for the 16 months preceding FTX’s collapse.”
FTX founder Sam Bankman-Fried was found guilty on seven different fraud charges in November 2023 after a nearly month-long trial that saw a number of former Alameda Research and FTX executives testify against him.
“FTX had a handful of Insiders and employees with virtually limitless power to direct transfers of fiat currency and crypto assets and to hire and fire employees, with no effective oversight, internal controls, or checks on exercising these powers,” states the lawsuit.”
“No Guarantee” for Victims of FTX Crypto Fraud
Before the lawsuit, Sullivan and Cromwell’s attorney Andrew Dietderich promised the crypto exchange’s debtors that they would be repaid in full. Investors expressed their scrutiny of his claims in the lawsuit, however.
“Sullivan & Cromwell FTX Fraud Case: Legal Ethics in Cryptocurrency Spotlight” – a must read for crypto attorneys.
The Complaint, cites a quote by Ryne Miller (FTX’s Ex-GX), on the first page The difference between something that’s illegal and something that needs your… pic.twitter.com/pOrdHGdLU4
— John Montague | Montague Law (@_montague__) February 21, 2024
“Doomed from the start, the FTX Group imploded, and over $30 billion in value evaporated almost overnight when the FTX Group filed its emergency Chapter 11 bankruptcy petition in Delaware,” the lawsuit continues. “The FTX Group’s bankruptcy proceeding is likely to continue for many years, with no guarantee that any of the victims will be able to see full recovery from those proceedings.”
Bankman-Fried’s Beef With Sullivan and Cromwell
Meanwhile, Bankman-Fried has had his own conflicts with Sullivan and Cromwell’s lawyers, with reports alleging Dietderich to be behind the company’s removal of the FTX founder.
Currently, FTX’s bankruptcy process is being led by John Jay Ray III, an attorney specializing in the cleanup of troubled companies who gained notoriety for his role in recovering assets following Enron’s collapse.
Bankman-Fried’s sentencing is currently scheduled for March 28, 224.
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