Insider Blows Whistle at FTX Law Firm’s Alleged Misconduct
In a surprising cryptocurrency news related to the bankrupt crypto exchange FTX, a former creditor has made explosive claims about the handling of the platform’s law firm, Sullivan & Cromwell. The claims suggest that the law firm blocked potential bids for the exchange’s assets in order to maximize its own fees.
The creditor also argued that Sullivan & Cromwell thwarted the exchange’s plans for the FTX 2.0 relaunch. According to him, the law firm prioritized its gains through the liquidation process over the possible flow of billions of dollars to the creditors.
Creditor Slams Sullivan & Cromwell over FTX 2.0 Fiasco
In a recent X post, a former FTX creditor known as Arush claimed that the real story behind FTX 2.0 is even wilder than what has been reported. His words read, “This story is so crazy and it is one of the highlights/lowlights of my life to have witnessed it – the real story is even wilder.”
According to the insider, the bankruptcy proceedings and FTX’s plans to reboot were disrupted by the law firm Sullivan & Cromwell, which handles the case. Arush, a member of the FTX Unsecured Creditors Committee (UCC), three major platforms, including Bullish, Figure, and one unnamed CEX, had shown interest in bidding for the bankrupt exchange. Arush added, “Contrary to Andrew Dieterich’s lies about nobody wanting to buy FTX2.0, there were 3 credible and well funded finalists in the sale process.”
However, their bids were allegedly blocked by the low firm, which allegedly prioritized its benefits over those of the creditors. He added that the proposed bid included an equity structure that could have added tens of billions of dollars to creditor repayments, far exceeding what they would receive through liquidation. But, as per the creditor’s statement, Sullivan & Cromwell’s actions have blocked this initiative, sparking widespread outrage among creditors who believe that the law firm has deprived them of a valuable opportunity.
FTX Creditors Missed a Huge Opportunity, Says Arush
Further, Arush argued that the FTX creditors missed a huge opportunity due to the intervention of Sulliven & Cromwell. Reportedly, the bidders’ offers had significant equity components. If realized, it would have added tens of billions in value to FTX creditors’ holdings, but the lawyers allegedly killed the deal.
This outcome was reportedly as surprising to the bidders as it was to the general public and creditors, given the substantial value that could have been realized. The bidders had promised to tokenise claims and manage the multi-billion dollar venture and crypto portfolio, with highly capable leaders such as Arjun Sethi, Tom Farley, and Mike Cagney.
Instead, the bankruptcy process led to a different outcome, with creditors not benefiting from the potential value. This also led to customers moving to other platforms like Hyperliquid. He wrote,
“FTX creditors would have benefited from any of them, instead we got John “Anthropic is vaporware” Ray, Sullcrom shut down the sale and basically all 9M customers moved to Hyperliquid.”
Crypto Community Unites against Sullivan & Cromwell
In response to Arush’s post, more community members have expressed their viewpoints, agreeing with his notion that Sullivan & Cromwell and John Ray used “risk” as a pretext to protect their own financial interests. One X user claimed that shutting down the potential deals would cost the creditors tens of billions of dollars in future value.
He also questioned whether the decisions made by the law firm were truly in the best interests of the creditors or if they were motivated by self-interest, particularly given the potential surge in value of assets like Anthropic.
“Yes. We, the SEC knew Anthropic was a generational company, like having 10% of AAPL or AMZN in the 80s or 90s,” noted Arush, in response. He added, “We struck a deal with John Ray to hold on to it, but he negotiated in bad faith, turned around and dumped it.”
