FTX bankruptcy lawyer acquitted of conspiracy charges in investigation
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The law firm that managed the FTX bankruptcy was found to be ignorant of the dire financial circumstances and underlying fraud that led to the exchange’s collapse.
After a series of disturbing events that led to the exchange’s complete collapse, FTX filed for Chapter 11 bankruptcy on November 17, 2022.
Sullivan & Cromwell LLP, the law firm that managed FTX’s bankruptcy, was ignorant of the serious financial circumstances and underlying fraud that led to the collapse of the once-thriving exchange, an independent investigation into the company has found.
An investigation by former U.S. Attorney Robert Cleary found that Sullivan & Cromwell attorneys made fraudulent claims while defending FTX, but did so without their knowledge.
After the findings were made public, Sullivan & Cromwell released the following statement:
“Sullivan & Cromwell remains confident in our prepetition work against FTX and the commencement of the Chapter 11 case, and we welcome the examiner’s findings to date, which reject a variety of unsubstantiated claims about our work against FTX.”
The investigation was ordered following widespread suspicion and accusations against Sullivan & Cromwell by FTX creditors and customers seeking relief.
Concerned creditors and former platform users, who believed that the law firm’s pre-bankruptcy cooperation with FTX threatened the integrity and neutrality of the legal profession, reacted negatively to the law firm’s original appointment to oversee the bankruptcy proceedings.
After a series of disturbing events that led to the exchange’s complete collapse, FTX filed for Chapter 11 bankruptcy on November 17, 2022.
A week before the now-famous crash, Binance made an effort to purchase FTX, initiating a non-binding contract to buy the exchange and assume daily management.
The announcement of the acquisition resulted in an adverse market reaction, with the value of the FTX token (FTT) dropping from nearly $22 to $5.50 in a single trading day.
A day later, Binance canceled the tentative deal, citing issues with FTX’s financial health, user asset inflows, and news of the US government’s initial investigation into the public exchange.
The cancellation fueled widespread suspicion that something was wrong with FTX and added to the company’s downfall.
Rumors circulated in the media that FTX lost nearly $1 billion in customer funds just days after Binance offered and then withdrew the contract. Customers desperately tried to get their money out of the failed platform, which led to further exchanges.
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