FTX's Bankruptcy: Sullivan & Cromwell LLP Under Scanner; Binance Deal Fallout Amplifies Collapse
Summary:
An independent investigation into Sullivan & Cromwell LLP, the legal firm overseeing the FTX bankruptcy, reveals that the firm was uninformed about the dire financial conditions and fraud leading to FTX's downfall. The law firm still stands confident about their work for FTX despite criticism from creditors and clients. FTX filed for Chapter 11 bankruptcy on November 17, 2022, following risky business moves and resulting in a massive customer asset loss. Binance's withdrawn acquisition agreement amplified FTX's collapse, sparking extensive skepticism in the market.
An independent inquiry into Sullivan & Cromwell LLP, the legal firm managing the FTX bankruptcy, discovered the company was not informed of the dire economic circumstances or underlying fraudulent activities that propelled the once flourishing exchange to crumble. The inquiry was led by ex-U.S. prosecutor Robert Cleary who pointed out that although Sullivan & Cromwell's legal professionals did provide untruthful statements while advocating for FTX, they did so unknowingly. In response to the research findings becoming public, Sullivan & Cromwell issued a comment confidently supporting their pre-petition work for FTX, and appreciating the examiner's dismissal of any unfounded claims regarding their work. This investigation was initiated after creditors of FTX and the clients looking for redress expressed extensive skepticism and disapproval towards Sullivan & Cromwell. The law firm experienced criticism from concerned creditors and previous platform users when initially chosen to supervise the bankruptcy procedure, as many felt the firm's pre-bankruptcy involvement with FTX undermined its impartiality and reputability. On November 17, 2022, following a succession of concerning events leading to its complete downfall, FTX declared Chapter 11 bankruptcy. Just a week prior to the infamous collapse, Binance was in negotiations to buy FTX, starting a non-binding agreement to acquire the exchange and oversee its daily operations. This proposed acquisition news was poorly received by the market, leading to the FTT token's value falling from about $22 to $5.50 within a single trading day. Binance withdrew from the tentative agreement just 24 hours later, expressing apprehension over the financial standing of FTX, mingling of client funds, and early investigative reports from U.S. authorities regarding the popularly used exchange. This withdrawal amplified the fall of FTX, fueling the already wide-reaching concerns about the firm's operations. As media reports started surfacing about approximately $1 billion of customer assets supposedly missing from FTX, several days after Binance's withdrawn proposal, this led to further panic withdrawals from the faltering platform.
Published At
5/24/2024 7:59:43 PM
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