FTX Creditors Sues Bankruptcy Lawyers For Role in Exchange’s Collapse

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In a recent development surrounding the collapse of the cryptocurrency exchange FTX, creditors have initiated a class-action lawsuit against Sullivan and Cromwell (S&C), the law firm responsible for overseeing the exchange’s bankruptcy proceedings. According to the lawsuit, the bankruptcy law firm was complicit in the fraudulent activities leading to FTX’s downfall.

The collapse of FTX sent shockwaves through the cryptocurrency community, leaving many investors and traders in limbo. As the bankruptcy proceedings unfolded, questions arose regarding the circumstances leading to the exchange’s demise. Now, with creditors taking legal action against S&C, the situation’s complexity deepens.

Reasons Behind the FTX Creditors Class-Action Lawsuit

The class action lawsuit revealed when the law firm worked as outside counsel for the bankrupt exchange before its collapse. Meaning the law firm gained knowledge of the exchange’s dealings and supported it. Also, the plaintiffs argue that the law firm failed to fulfill its obligations and may have even facilitated the fraudulent activities that ultimately led to financial losses for many.

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Furthermore, the lawsuit alleges that lawyer Ryne Miller was aware of the exchange’s back door that allowed it to channel FTX customer funds to Alameda. Also, Miller mentioned that he gave this particular information to several individuals at S&C. Meanwhile, the lawsuit noted the amount that the law firm gained by overseeing the FTX bankruptcy proceedings.

Implications of The Class Action Lawsuit

However, the outcome of this lawsuit could have significant implications not only for the firm but for the broader legal and financial sectors. If the allegations are proven true, it could raise serious questions about the role of legal professionals in cases involving cryptocurrency exchanges and other high-risk financial entities.

Meanwhile, earlier this month, former United States Securities and Exchange Commission (SEC) official John Reed Stark took to social media platform X to highlight the fact that the exchange’s lawyers are now rich beyond their dreams amid the restructuring proceedings. 

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FTX Lawyers Robbing the Exchange 

According to Stark, the FTX restructuring plan might be a way for the bankrupt firm’s legal team to profit from the procedure. He also added that all the customers of the exchange waiting for their money should receive a sarcastic “Thank You” note from the trading platform’s legal team, given the staggering profits they made during the bankruptcy.

On the other hand, the exchange decided to give up on its plans for a reboot dubbed “FTX 2.0” and is now solely focused on the repayment.

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