FTX investors halt lawsuit against law firm Sullivan & Cromwell.
A group of investors in FTX informed a federal court in Miami on Wednesday of their decision to voluntarily withdraw their proposed class action lawsuit against the well-known U.S. law firm Sullivan & Cromwell.
The investors had alleged that Sullivan & Cromwell was involved in the multibillion-dollar fraud associated with the now-defunct cryptocurrency exchange and subsequently profited as the lead counsel during FTX's bankruptcy proceedings. The firm had represented FTX in approximately 20 legal matters prior to its downfall.
However, Adam Moskowitz, the lead counsel for the plaintiffs, stated to Reuters on Wednesday that there were "no claims at this stage" against the New York-based law firm. Moskowitz referenced the findings of FTX bankruptcy examiner Robert Cleary from Patterson Belknap Webb & Tyler, who, in reports released in May and September, concluded that Sullivan & Cromwell was not complicit in the fraud that led to the collapse of the crypto company and had not overlooked any warning signs during its representation of former FTX CEO and founder Sam Bankman-Fried. "Bob Cleary's second report provided us with sufficient evidence to determine that there was no claim against them," Moskowitz remarked. A spokesperson for Sullivan & Cromwell expressed satisfaction in a statement, noting that the firm is "pleased that the plaintiffs have unconditionally withdrawn their meritless claims, and our focus remains on recovering billions of dollars in assets for FTX’s creditors."
The lawsuit had claimed that Sullivan & Cromwell possessed unique insights into the exchange's "complex organizational structure, severe lack of internal controls, and questionable business practices." It further accused the firm's attorneys of being "keen to devise not only creative but also misleading strategies that facilitated FTX’s misconduct."
In a filing made in May, Sullivan & Cromwell argued that the allegations were fraught with "numerous legal defects" and were based on "thin allegations, unfounded assumptions, and legal conclusions that the court need not accept as true even at the pleading stage." FTX declared bankruptcy in November 2022 following allegations that the company had misappropriated and lost billions of dollars in customer crypto deposits.
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