Sam Bankman-Fried Alleges Sullivan & Cromwell Used ‘Mentally Unbalanced’ Tactics To Get FTX To File Bankruptcy

Sam Bankman-Fried (Photo by Matias J. Ocner/Miami Herald/Tribune News Service via Getty Images)

If you’re trying to write a crypto bro character and came up with something approaching the real life Sam Bankman-Fried (SBF, natch), you’d get mocked for being too on the nose. But here we are.

googletag.cmd.push( function() { // Display ad. googletag.display( "div-id-for-top-300x250" ); });

The erstwhile CEO of crypto exchange FTX  is in a whole mess of legal trouble — most notably his indictment on fraud and related charges. He’s been scaring away lawyers and talking to the press despite advice from the counsel he does have — all this despite having two prominent law professors as parents.

Sponsored Looking For A Turnkey Solution To Move Your Law Firm To The Cloud? You can have fast, secure access to your files and applications from anywhere without having to learn anything new or purchase upgraded hardware. Here’s how. From Above the Law

Now, Forbes reports on the testimony SBF prepared to give before Congress… until he got arrested the day before. Some of the juiciest revelations in the testimony deal with Biglaw firm Sullivan & Cromwell. S&C repped FTX as outside counsel, and the company’s General Counsel, Ryne Miller, is a former partner at the firm.

SBF’s testimony alleges Sullivan as well as Miller, pressured him to file for Chapter 11 bankruptcy protections using tactics that “range from adamant to mentally unbalanced.”

googletag.cmd.push( function() { // Display ad. googletag.display( "div-id-for-middle-300x250" ); }); googletag.cmd.push( function() { // Display ad. googletag.display( "div-id-for-storycontent-440x100" ); }); googletag.cmd.push( function() { // Display ad. googletag.display( "div-id-for-in-story-youtube-1x1" ); });

Most of that pressure came from Ryne Miller, the General Counsel of FTX US and a former partner at Sullivan & Cromwell (S&C), and Sullivan and Cromwell itself.

Sullivan & Cromwell was one of the primary external law firms that represented FTX US as well as FTX International at the time.

I have 19 pages of screenshots of Sullivan & Cromwell, Mr. Miller, and others I believe were influenced by them, all sent over a two day period, pressuring me to quickly file for Chapter 11. They range from adamant to mentally unbalanced. They also called many of my friends, coworkers, and family members, pressuring them to pressure me to file, some of whom were emotionally damaged by the pressure. Some of them came to me, crying.

The testimony goes on to further allege Sullivan made promises to SBF it didn’t keep:

Sponsored Sponsored From Equity Management to Liquidity: How Morgan Stanley at Work Is Supporting Top Law Firms Read on to learn how empowering your clients with equity solutions can set them and their employees up for success. From Stephanie Wilkins Sponsored Thomson Reuters’ Practical Law — The Journal: Transactions & Business Explore decentralized finance, ESG-driven divestments, supply chain disruptions, and much more with the help of Practical Law’s over 300 attorney editors.   From Above the Law and Thomson Reuters Sponsored MyCase And LawPay — Better Together Why small and midsize firms win big in a blockbuster merger. From Above the Law Sponsored MyCase And LawPay — Better Together Why small and midsize firms win big in a blockbuster merger. From Above the Law

During the time I was being pressured to file, Sullivan & Cromwell lawyers told my counsel that I would get to choose the board chair. Sullivan & Cromwell silently reneged on that a few days later.

SBF also planned to testify that his efforts to back out of appointing John Ray, who he describes as “famous primarily for his work for the Enron bankruptcy estate,” were stymied by Sullivan & Cromwell.

At roughly 4:30 am on November 10th, 2022, against my better judgment, I clicked on a Docusign link that would nominate John Ray as the CEO of various entities.

Less than 10 minutes later I received a potential funding offer for billions of dollars to help make customers whole.

A few minutes thereafter I instructed my counsel to rescind the document; it had become clear to me that it was not the best way forward.

My counsel informed me a few minutes later that it was too late to rescind it, and that Sullivan & Cromwell lawyers were submitting it on my behalf despite my instructions not to.

Roughly 6 hours later—more than ample time to change course— Sullivan & Cromwell filed the document with the court against my express wishes and stated orders.

googletag.cmd.push( function() { // Display ad. googletag.display( "div-id-for-bottom-300x250" ); });

Of course, by the time FTX filed for bankruptcy, the company’s shortfall had reportedly grown to $8 billion.

Listen, Sullivan & Cromwell hasn’t — and given you know, attorney client privilege, probably won’t — commented on the matter. But all the various strands of FTX litigation seem bound to get messy… and isn’t it fun for us that Biglaw is wrapped up them.

Sponsored Sponsored The View from Inside: How In-House Leaders Can Improve Department Dissatisfaction and Mitigate Attrition Here’s the bottom line: if you are a GC or in-house legal leader, more than half of your legal team should be considered a flight… From Axiom and Above The Law Sponsored Looking For A Turnkey Solution To Move Your Law Firm To The Cloud? You can have fast, secure access to your files and applications from anywhere without having to learn anything new or purchase upgraded hardware. Here’s how. From Above the Law

Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon @[email protected].

Topics

Bankruptcy, Biglaw, FTX, Ryne Miller, Sam Bankman-Fried, Sullivan & Cromwell