Court did not support Senate against FTX lawyers
2023.01.12 02:31
Court did not support Senate against FTX lawyers
By Ray Johnson
Budrigannews.com – According to reports, the bankruptcy judge in charge of FTX has reportedly criticized a joint letter from four senators in the United States calling for an independent examiner in the case.
Reported that the senators sent a letter on January 9 expressing concerns about the ties between FTX and Sullivan & Cromwell LLP, which would be tasked with investigating alleged past wrongdoing by the exchange as the lead law firm in the bankruptcy proceedings.
However, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware referred to the letter as “inappropriate ex parte communication” at a hearing on January 11 and said that he would not take it into account when making a decision.
According to a Law360 report from January 11, he said during the hearing, “I will make my decisions on the matters based only upon admissible evidence and the arguments presented in open court.”
An action taken by one party in a legal proceeding without the participation of the opposing party is known as ex parte.
A bipartisan group of senators, including John Hickenlooper, Thom Tillis, Elizabeth Warren, and Cynthia Lummis, questioned the appointment of Sullivan & Cromwell and supported a motion for the appointment of an independent examiner in the letter that was sent to Judge Dorsey on January 9.
The U.S. Trustee submitted the motion on December 12.
One senator raised the possibility of a conflict of interest when he mentioned in the letter that the law firm had previously provided FTX with legal advice and that members of the firm had left to take positions at FTX.
Learn this: Prior to the collapse, the legal advisors of FTX requested that they be appointed to direct investigations into the collapse.
Even though I’m not a lawyer, that sounds like a conflict of interest. Together with Sen. Thom Tillis, Sen. Warren, and Sen. Lummis
Budrigannews was informed by a spokesperson for Sullivan & Cromwell that the law firm had “never served as primary outside counsel to any FTX entity” and thus met the definition of “disinterested” as defined by the U.S. Bankruptcy Code.
The judge’s rejection of the senators’ letter does not imply that he will deny the motion to appoint an independent examiner or approve Sullivan & Cromwell as FTX’s legal counsel.
The representative of FTX creditor Warren Winter filed an amended objection to the appointment of Sullivan & Cromwell on January 10 claiming that the appointment could undermine the public’s faith in the bankruptcy process and that the law firm itself was a “target for investigation” regarding its own “potential liability.” The judge will still need to review the objection to the appointment of Sullivan & Cromwell.
The bankruptcy courts frequently appoint independent examiners to conduct in-depth investigations into complex cases and to present information to the courts in an impartial manner.
They have been appointed to Lehman Brothers during the subprime mortgage crisis and the cryptocurrency exchange Celsius, two other high-profile bankruptcy cases.
A spokesperson for Sullivan & Cromwell told Cointelegraph that the law firm met the U.S. Bankruptcy Code’s definition of “disinterested” because it had “never served as primary outside counsel to any FTX entity.”
Even though the senators’ letter was rejected by the judge, this does not mean that the judge will reject the motion to appoint an independent examiner or to approve Sullivan & Cromwell as FTX’s legal counsel.
On January 10, the representative of FTX creditor Warren Winter submitted an amended objection to the appointment of Sullivan & Cromwell. In the amended objection, the representative stated that the appointment had the potential to undermine the public’s faith in the bankruptcy procedure and that the law firm itself was a “target for investigation” regarding its own “potential liability.” The objection to Sullivan & Cromwell’s appointment must still be examined by the judge.
In order to impartially present information to the bankruptcy courts and conduct in-depth investigations into complex cases, the courts frequently appoint independent examiners.
During the subprime mortgage crisis and the cryptocurrency exchange Celsius, two other high-profile bankruptcy cases, they were appointed to Lehman Brothers.
Budrigannews was informed by a spokesperson for Sullivan & Cromwell that the law firm met the definition of “disinterested” in the United States Bankruptcy Code because it had “never served as primary outside counsel to any FTX entity.”
The judge did not reject the senators’ letter, but this does not mean that the motion to appoint an independent examiner or to approve Sullivan & Cromwell as FTX’s legal counsel will be denied by the judge.
Warren Winter, a representative of FTX creditor, amended his objection to the appointment of Sullivan & Cromwell on January 10. The representative stated in the amended objection that the appointment could damage public confidence in the bankruptcy process and that the law firm itself was a “target for investigation” regarding its own “potential liability.” The judge still needs to look into the objection to the appointment of Sullivan and Cromwell.
The courts frequently appoint independent examiners to conduct in-depth investigations into complex cases and impartially present information to the bankruptcy courts.
They were appointed to Lehman Brothers during the subprime mortgage crisis and the cryptocurrency exchange Celsius, two other high-profile bankruptcy cases.
