S&C Bankruptcy Law Firm Cleared of Misconduct in New FTX Proposal

FTX’s revised proposal to repay its creditors, which was released on May 7, has caused dissatisfaction among the creditors. The proposal includes an exculpatory clause, which relieves certain parties of liability in the event of damages during the bankruptcy process. Some creditors, including Sunil from the FTX Customer Ad-Hoc Committee, believe that law firm Sullivan & Cromwell (S&C) included this clause to protect themselves from potential liabilities. Sunil alleges that S&C may have engaged in misconduct, such as selling FTX assets at discounted prices to their own clients and insiders. This controversial clause has emerged three months after the top FTX creditors filed a lawsuit against S&C, accusing the firm of benefiting financially from FTX’s fraudulent activities.

Sullivan & Cromwell is the century-old law firm handling the FTX bankruptcy proceedings. It has previously served as outside counsel for FTX in various transactions, for which it received significant payments. According to documents from December 2023, FTX owed the law firm up to $1.45 billion in legal bankruptcy fees. FTX’s new plan has garnered significant backlash from crypto investors. Many are particularly unhappy with the exculpatory clause, which could lead them to vote against the proposal.

Despite FTX debtors’ claims that they would offer an 11% payout to over 98% of the creditors and billions in compensation to the remaining creditors, some argue that this is not fair. This is because the compensation is based on a Bitcoin price of $16,800, which has significantly appreciated since the collapse. As a result, none of the FTX creditors are satisfied with this compensation structure. According to Mike Belshe, the CEO of BitGo, none of the creditors believe that receiving $16,800 for their Bitcoin holdings is sufficient compensation. Belshe acknowledges the necessity of the bankruptcy process while highlighting the inadequate restitution for the victims.

FTX’s amended proposal has faced criticism from creditors due to the presence of the exculpatory clause and the perceived inadequacy of the compensation structure. The controversy surrounding Sullivan & Cromwell’s alleged involvement in FTX’s fraudulent activities has further fueled dissatisfaction among the creditors. As a result, it remains uncertain whether FTX’s amended plan will be accepted by the creditors.

5 thoughts on “S&C Bankruptcy Law Firm Cleared of Misconduct in New FTX Proposal

  1. This exculpatory clause is an absolute joke! It’s clear that it’s just meant to protect Sullivan & Cromwell from any liabilities.

  2. The controversy surrounding Sullivan & Cromwell’s involvement just adds fuel to the fire. Can we even trust them to handle this bankruptcy properly?

  3. FTX’s proposal is nothing more than a desperate attempt to protect Sullivan & Cromwell. The creditors deserve better than this.

  4. It’s clear that FTX’s amended plan is not going to be accepted by the creditors. This whole situation is a mess. 😫

  5. Offering compensation based on a Bitcoin price from months ago is completely unfair! They’re shortchanging the creditors who have already lost so much. 😠

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