Judge Slams Senators’ Letter Targeting FTX Bankruptcy Lawyers

The Delaware judge overseeing FTX’s bankruptcy proceedings criticized four US senators for what he called an “inappropriate” letter, in which the lawmakers questioned law firm Sullivan & Cromwell’s role as the failed crypto exchange’s bankruptcy counsel.

The missive is “an inappropriate ex-parte communication,” Judge John Dorsey said in a Wednesday hearing in FTX’s Chapter 11 case. “It will have no impact on my decisions,” said Dorsey.

Four lawmakers, led by Sen. John Hickenlooper (D-Col.), argued in a Jan. 9 letter to Dorsey that the Wall Street law firm was a wrong fit for the role as FTX’s bankruptcy counsel due to its previous work for the failed crypto exchange.

“Given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims,” the senators said. “The firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.”

The group, which also included Sens. Thom Tillis (R-NC), Elizabeth Warren (D-Mass.), and Cynthia Lummis (R-Wyo.), called on Dorsey to support a U.S. Trustee’s motion for an independent examiner to review activities that led to FTX’s implosion.

Sullivan & Cromwell received about $8.5 million from FTX and other affiliates in the 16 months prior to the exchange’s collapse for work primarily relating to transactions and regulatory inquiries, according to its December application to remain counsel.

The firm added in that filing that it received a $12 million retainer from an FTX-controlled company to handle the early phase of the Chapter 11 case.

Before being arrested, former FTX leader Sam Bankman-Fried planned to testify before Congress that the firm was a “primary external law firm” for certain FTX entities and that it applied pressure to file for Chapter 11, according to a leaked transcript of his prepared remarks.

Sullivan & Cromwell said in a statement Tuesday that is has never served as primary outside counsel to an FTX entity.

“The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy,” the firm said in a statement.

Dorsey has yet to weigh in on Sullivan & Cromwell’s application to remain as FTX’s counsel in the bankruptcy proceedings.

Warren Winter, an FTX creditor who claims to have lost hundreds of thousands of dollars after the exchange’s collapse, has also objected to the firm’s role in the case. Winter said in an amended motion filed Tuesday that a range of conflicts—including that former Sullivan & Cromwell attorneys Ryne Miller and Tim Wilson are now top in-house lawyers to FTX entities—should preclude the firm from serving as bankruptcy counsel.

FTX and more than a hundred of its affiliates filed for bankruptcy in November listing assets and liabilities of at least $10 billion. Bankman-Fried is facing criminal charges for allegedly misusing billions of dollars in FTX customer funds.