FTX examiner Robert J. Cleary has requested court approval to extend the investigation into law firm Sullivan & Cromwell LLP (S&C) and other issues related to the defunct exchange, as detailed in a June 10 court filing.

The investigation is projected to take 10 weeks and cost $3 million.

Examining S&C’s Involvement

The June 10 motion disclosed that the examiner will scrutinize the legal services S&C provided to Sam Bankman-Fried, FTX’s convicted founder, particularly during his purchase of Robinhood shares. Cleary aims to determine if S&C was aware of fraudulent activities within FTX and if any conflicts of interest were ignored when the court approved their retention as counsel. The filing stated:

"The investigation will determine if S&C advised on, possessed, or was made aware of critical facts related to the FTX Group’s misconduct."

If S&C’s representation of Bankman-Fried in acquiring Robinhood shares is deemed improper or conflicted, it could have significant legal and financial repercussions for all involved parties.

A spokesperson for S&C told CryptoSlate on June 11:

"Sullivan & Cromwell remains confident in our prepetition work for FTX and the commencement of the Chapter 11 cases, and we welcome the Examiner’s findings to date rejecting various baseless allegations about our work for FTX. If the Court concludes that any points require further review, we will continue to cooperate fully with the Examiner."

In May 2022, Bankman-Fried acquired a 7.6% stake in Robinhood for $648.3 million. Following FTX’s collapse, the US Department of Justice seized these shares, which became a point of contention among various FTX-related parties.

S&C’s broader involvement with FTX has also been contentious. In December 2022, Bankman-Fried claimed S&C pressured him into declaring bankruptcy to earn legal fees. Additionally, FTX creditors have filed a class-action lawsuit against the firm, arguing that it should be partially responsible for the exchange’s collapse.

Further FTX Investigations

Cleary’s motion also sought to investigate the pre-bankruptcy sale of Ledger Holdings Inc. (LHI) and the financial discrepancies in FTX US.

The examiner stated that these inquiries would enhance public confidence in the bankruptcy process by uncovering any misconduct or related issues. He added:

"Further investigation and reporting on FTX.US’s insolvency could promote public confidence in the bankruptcy process by refuting Bankman-Fried’s false claims that FTX.US was solvent as of the Petition Date."