FTX examiner Robert J. Cleary has requested court approval to expand investigations into Sullivan & Cromwell LLP (S&C) and other aspects related to the defunct exchange, according to a court filing on June 10. The examinations are anticipated to span 10 weeks and cost approximately $3 million.

The motion disclosed that Cleary intends to scrutinize the legal services provided by S&C to Sam Bankman-Fried, the convicted founder of the now-defunct exchange, during his acquisition of Robinhood shares. The investigation aims to ascertain whether S&C was aware of any fraudulent activities within FTX and whether there were any conflicts of interest overlooked when the court approved their retention as legal counsel. The filing stated:

"The investigation seeks to determine more broadly whether, in connection with or as a result of this representation, S&C advised on, possessed or gained knowledge of, or had been made aware of critical facts relating to the FTX Group’s misconduct."

Potential improper or conflicted representation by S&C in the acquisition of Robinhood Markets shares could carry significant legal and financial implications for all involved parties.

In response to inquiries, a spokesperson for S&C informed 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 purchased a 7.6% stake in Robinhood for $648.3 million. Following FTX’s collapse, these shares were seized by the US Department of Justice, sparking disputes among various FTX-related entities.

S&C’s broader involvement with FTX has sparked controversy, including allegations that the firm pressured Bankman-Fried into declaring bankruptcy for the sake of accruing legal fees. Furthermore, FTX creditors have initiated a class-action lawsuit against S&C, arguing that it bears partial responsibility for the exchange’s demise.

Cleary's motion also aims to investigate the pre-bankruptcy sale of Ledger Holdings Inc. (LHI) and discrepancies in FTX US’s balance sheet. These inquiries are intended to uphold public confidence in the bankruptcy process and uncover any misconduct associated with it. Cleary 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."