FTX Employees Turn to Covington for Help
2023.01.13 15:07
FTX Employees Turn to Covington for Help
Budrigannews.com – Three people who are familiar with the situation told Reuters that a number of FTX employees have turned to the law firm Covington & Burling for assistance in dealing with questions from U.S. authorities who are looking into the collapse of the cryptocurrency exchange and the actions taken by its founder, Sam Bankman-Fried.
According to the individuals, who spoke on condition of anonymity, Arlo Devlin-Brown, a New York-based Covington partner and former Manhattan federal prosecutor, is acting as so-called pool counsel to represent current FTX employees as individuals being asked to share information with prosecutors and regulators.
Employers who are the subject of extensive investigations frequently employ pool counsel. The use of pool counsel suggests that FTX’s collapse-investigating federal prosecutors in Manhattan may be interested in questioning a large number of employees.
In December, Bankman-Fried, 30, was arrested on charges of lying to investors and lenders and stealing customer funds to cover losses at his hedge fund, Alameda Research.
The former billionaire denied guilt. Two close friends admitted their guilt and agreed to assist prosecutors. Manhattan’s top federal prosecutor, Damian Williams, has urged anyone with information to come forward.
Sarah Krissoff, a former federal prosecutor in Manhattan who is now a partner at Day Pitney, stated, “It’s nerve-wracking to participate in an interview with the FBI and the U.S. Attorney’s office, regardless of your personal exposure.” Krissoff was speaking about the experience.
According to Krissoff’s explanation, pool counsel, which represents employees who typically do not have significant exposure to criminal charges on their own but may be uneasy about speaking with the authorities, is paid for by employers.
According to Krissoff, pool counsel enables a single legal team to acquire case expertise, making it more efficient than hiring individual lawyers for each employee. She went on to say that pool counsel must act quickly to spot potential conflicts among their clients and encourage them to hire their own lawyers when necessary.
Covington is not representing FTX, which has switched to another law firm, Sullivan & Cromwell, as a result of the arrangement.
After a flurry of customer withdrawals prompted by concerns that the exchange had mixed funds with Alameda, FTX filed for bankruptcy on November 11.
Numerous former FTX executives, including its former top lawyer Daniel Goldberg, have retained their own legal counsel to assist them in pursuing potential cooperation with prosecutors.
Reuters was unable to ascertain the number of FTX employees represented by Covington or the information that the employees have provided to prosecutors, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, all of which are conducting investigations.
Covington, Bankman-Fried, and the Manhattan U.S. Attorney’s office all declined to comment. A request for clarification was not received by FTX.
After working for the Manhattan U.S. Attorney’s office for nearly 11 years, Devlin-Brown joined Covington in 2016. He prosecuted the hedge fund SAC Capital Advisors of Steven Cohen as a member of the office’s securities and commodities fraud unit, which pleaded guilty to insider trading.
He was later promoted to chief of the office’s public corruption unit, where he was in charge of the cases against Sheldon Silver and Dean Skelos, two former top New York State legislators who were found guilty of corruption.
John Ray, a specialist in corporate restructuring who was in charge of Enron’s liquidation, now runs FTX. Sources informed Reuters in December that Ray has met with prosecutors.
Ray wrote in a statement that was submitted to the bankruptcy court on November 17 that FTX needed employees to remain employed in order to “establish accountability, preserve value, and maximize stakeholder recoveries.”
