Lawsuit allegations against Sullivan & Cromwell are ‘innuendo masquerading as facts,’ motion says
Law Firms
Lawsuit allegations against Sullivan & Cromwell are ‘innuendo masquerading as facts,’ motion says
May 17, 2024, 9:24 am CDT
Sullivan & Cromwell is seeking dismissal of a proposed class action lawsuit alleging that it aided and abetted fraud when it provided legal services at cryptocurrency exchange FTX. (Image from Shutterstock)
Sullivan & Cromwell is seeking dismissal of a proposed class action lawsuit alleging that it aided and abetted fraud when it provided legal services at cryptocurrency exchange FTX.
In a May 13 motion to dismiss, Sullivan & Cromwell says the suit allegations are “innuendo masquerading as facts,” report Reuters and Bloomberg Law.
Samuel Bankman-Fried, the founder of FTX, was convicted in November 2023 on charges of fraud and conspiracy. Prosecutors said he touted the exchange as a safe platform for crypto asset trading while diverting billions of dollars in customer assets to his privately held hedge fund.
While representing FTX over a period of 14 months, the law firm provided representation in about 20 discrete matters, according to the motion filed in the U.S. District Court for the Southern District of Florida. Sullivan & Cromwell is now working as FTX bankruptcy counsel.
The suit by former FTX customers is based on a theory “that because S&C provided lawful legal services to FTX while Bankman-Fried was at the helm, before his fraud was uncovered, S&C must have been complicit in that fraud,” the motion says.
The claims “rest on threadbare allegations, unwarranted assumptions and legal conclusions that the court need not accept as true even at the pleading stage,” the motion says.
There are no allegations that Sullivan & Cromwell had actual knowledge of fraud or that the firm substantially assisted fraud, the firm argued.
Sullivan & Cromwell lawyers “have worked around the clock to unwind the fraud perpetrated by Bankman-Fried and his inner circle” in its capacity as bankruptcy counsel, the motion says.
The “extraordinarily successful” efforts led to a reorganization plan that provides full payment of customer and nongovernmental creditor claims along with interest, according to the motion.
The plaintiffs are seeking to “recover the same damages for which they are already being compensated through the bankruptcy process,” the motion says.
Hunton Andrews Kurth is representing Sullivan & Cromwell in the case, Garrison v. Sullivan & Cromwell.
