Sullivan & Cromwell, a multinational law firm headquartered in New York City, is currently facing a class action lawsuit filed by a group of Investors at FTX, who claim that the law firm had unique insight into the crypto exchanges’ “convoluted organization structure, abject lack of internal control, and dubious business practices” thus contributing to the fraud, misused and lost billions of dollars’ worth of their customers crypto deposits, and ultimate bankruptcy filing in November of 2022.

Following the bankruptcy filing a year later, Sam Bankman-Fried, founder of FTX was found guilty of charges based on practices of taking money from FTX customers and using it to finance other investments.

No one at the firm has commented on the matter, although they have defended their work relating to FTX in the past, saying they had a “largely limited and largely transactional” partnership with the exchange prior to their bankruptcy, and had never served as primary outside counsel to any FTX entity.

More allegations come forth in this lawsuit against Sullivan & Cromwell, court-approved counsel for FTX, which claims that the firm had knowledge of FTX’s financial trouble but “realized it stood to gain hundreds of millions of dollars more from their work in bankruptcy.” – earning more than $180 million in fees for its FTX bankruptcy work, equaling about 10% of its 2022 revenue.

There have also been other objectors to Sullivan & Cromwell’s bid to serve as bankruptcy counsel from FTX creditors and U.S. lawmakers, who argue that the firms’ relationship and past work for the company create conflicts of interest. FTX’s former U.S. general counsel, Ryne Miller, was a former partner of Sullivan & Cromwell.

FTX Investors have a separate class action investor lawsuit being filed against the California-based law firm Fenwick & West, for contributing to fraud at the company as well. Fenwick has denied these allegations.

Whenever a business fails, there is the possibility of legal malpractice or other suits against counsel for the failed company. If you have questions about attorney liability, contact Kristi Browne at kbrowne@pattersonlawfirm.com.