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FTX Examiner Files Motion To Investigate Crypto Exchange’s Downfall

Julia Smith
Last updated: | 2 min read

Robert Cleary, the independent examiner appointed to handle investigations related to FTX’s bankruptcy estate, filed a motion on Monday to further probe Sullivan & Cromwell’s (S&C) working relationship with Sam Bankman-Fried (SBF) as well as “holes in the balance sheet” of FTX.US.

Sullivan & Cromwell’s management of the bankruptcy estate has long been scrutinized, given the international law firm handled a number of transactions for the doomed crypto exchange prior to its collapse.

Previously, Cleary found no evidence that Sullivan & Cromwell knew about the fraud at FTX, the company’s misrepresentations to regulators or ignored red flags. Additionally, Cleary found that Sullivan & Cromwell did not mislead Sam Bankman-Fried or violate its ethical duties.

Sullivan & Cromwell’s Ties To SBF Under Spotlight Once More

Cleary is seeking to investigate whether Sullivan & Cromwell knew about misconduct at the exchange—particularly allegations that attorneys for the firm advised Bankman-Fried on purchasing over 55 million Robinhood shares—and if so, to what extent.

“Investigation into this transaction would be important to help determine whether there was a potentially disqualifying conflict the Court should have been aware of when ruling on S&C’s retention application,” Monday’s filing read.

The motion further claims Cleary’s prob would seek to uncover whether Sullivan & Cromwell “advised on, possessed or gained knowledge of, or had been made aware of critical facts” related to FTX’s massive crypto fraud scheme.

Bankman-Fried and FTX co-founder Gary Wang originally purchased the shares in question through Emergent Fidelity Technologies in early 2023, though Robinhood has since bought back the stake in its entirety.

“SBF laundered customer deposits to buy Robinhood stock,” FTX creditor and activist Sunil Kaveri claimed in a recent post on X. “Emergent was set up to hide the source of funds.”

Robert Cleary-led Probes FTX’s “Holes In The Balance Sheet”

Additionally included in the filing is a request to uncover exactly what created certain “holes” in FTX’s balance sheet and by what means they could be filled, if any.

“Further investigation of the existence, cause, and resolution of “holes,” or balance sheet shortfalls, at FTX.US may identify additional misconduct or misuse of customer assets,” Cleary’s filing continued.

Monday’s motion marks the latest chapter in Sullivan and Cromwell’s winding legal saga regarding Sam Bankman-Fried and potential conflicts of interest.

Critics of the law firm, whose attorneys reportedly charge over $2,000 an hour for their work on the FTX estate, argue that it worked both sides of the crypto fraud scheme by advising SBF and heading up its bankruptcy efforts.

If approved, Cleary’s investigation would last approximately 10 weeks and cost an estimated $3 million.

Bankman-Fried is currently serving a 25-year sentence for orchestrating the global digital asset scheme, while Wang is expected to be sentenced sometime this year.