US trustee files objection to FTX’s choice of lawyers

A U.S. trustee has filed an objection to FTX hiring the New York law firm Sullivan and Cromwell. 

The filing by U.S. Trustee Andrew Vara, dated Jan. 13, claimed potential conflicts of interest due to S&C’s previous connections with the collapsed crypto exchange. 

“S&C’s disclosures as filed are wholly insufficient to evaluate whether S&C satisfies the Bankruptcy Code’s conflict-free and disinterestedness standards,” it read. 

As noted in the filing, FTX’s general counsel Ryne Miller worked at S&C for eight years. 

“The S&C Application is virtually silent as to both its connections to the Debtors and the work it did for the Debtors,” said Vara. “For example, the S&C Application omits the fact that the General Counsel of certain of the Debtors, Mr. Ryne Miller, was a partner at S&C until about 14 months before the filing.” 

It also noted that the S&C application to represent FTX does not provide any details about the types of services S&C provided to the exchange previously, including as it was in the process of collapsing. 

The Block reached out to S&C for comment but had not heard back by the time of publication. 

As a U.S. trustee, Vara is a part of the Department of Justice, which supervises bankruptcy proceedings in the United States and has a duty to ensure that bankrupt entities are not engaging in activities that would be detrimental to creditors or others with interests in the case.

Previously, Vara objected to the planned sale of its subsidiaries of LedgerX, FTX Europe and FTX Japan.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

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