Lawyers for FTX have accused Sam Bankman-Fried of trying to disrupt his crypto empire’s bankruptcy process by ‘attacking Twitter’.
In numerous tweets and blog posts over the past few weeks, Bankman-Fried has accused Sullivan & Cromwell, the law firm representing FTX in its Chapter 11 filing, of pressuring him to bankrupt the companies, including the US arm of FTX, which the former billionaire claims was solvent. The company has denied these claims.
James Bromley, a partner at Sullivan and Cromwell, said at a court hearing Friday that the firm was “fighting a spirit” by attempting to address Bankman-Fried’s public criticism of her role as FTX’s representative in the bankruptcy without him to be able to question court.
“One of the things that debtors generally face in these cases is being attacked by Twitter,” Bromley said.
The comments came at a hearing where the bankruptcy court was considering a motion by two FTX clients seeking to block Sullivan’s appointment, alleging conflicts of interest created by the company’s past work for the crypto group .
The judge eventually denied the request. “There is no evidence of actual conflict here,” Justice John Dorsey said.
The decision paves the way for Sullivan to potentially earn millions of dollars in fees representing FTX as it attempts to repay account holders. Dorsey noted that FTX had hired other law firms to help with conflicts.
The hearing and Bromley’s comments indicate how the high-profile FTX case and social media storm will complicate efforts to restructure the crypto exchange and repay money owed to millions of creditors.
Another former FTX insider, his top attorney Dan Friedberg, filed fresh allegations against Sullivan over alleged conflicts of interest in a last-minute court filing before the hearing on Thursday. The judge described the file as full of “hearsay, speculation and rumor” and “not something I would admit into evidence.”
Earlier this week, Sullivan filed dozens of pages of additional details about the nearly $10 million worth of legal work it did for Bankman-Fried’s companies before they were placed under bankruptcy protection last year. Two former Sullivan attorneys also held senior legal positions at FTX.
Bromley said on Friday the firm should have been more forthcoming from the start when it came to disclosing the extent of its past ties to the failed crypto group. “In retrospect, Your Honor, we should have gone further in the original statement,” he told the court.
He also claimed that Bankman-Fried, who has pleaded not guilty to US fraud charges, and other insiders who “brought the company to its knees” are concerned about the information Sullivan is providing to prosecutors and regulators.
“You can throw stones at debt attorneys who are providing information to prosecutors,” he said.
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The US Department of Justice had objected to the company’s initial disclosures about its work for FTX and has urged for more information. Government lawyers said Friday they were pleased with the additional details Sullivan provided.
Sullivan and Bankman-Fried declined to comment.
Separately, U.S. prosecutors confirmed on Friday that they had seized approximately $700 million worth of cash and stock from Bankman-Fried, including more than $500 million in shares in trading platform Robinhood.
The loot, detailed in a court filing, also includes funds contained in three accounts with cryptocurrency exchange Binance, the values of which were not disclosed.
The seizures took place in recent weeks, the government said, while Bankman-Fried was under house arrest in California after being released on a $250 million bond issue. He faces eight criminal charges.