by Pam Martens and Russ Martens, Wall St On Parade:
In a January 12 Substack column penned by Sam Bankman-Fried, the indicted co-founder and former CEO of collapsed crypto exchange, FTX, he writes that “When I would visit NYC, I would sometimes work out of S&C’s office.” S&C is shorthand for the 144-year old Big Law firm, Sullivan & Cromwell, which has come under withering media attention for attempting to steamroll its way into the position of lead counsel in the FTX bankruptcy proceedings – including investigating its own conduct as outside counsel to Sam Bankman-Fried and his byzantine collection of crypto companies.
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Wall Street On Parade has been covering the mushrooming conflicts of interest held by Sullivan & Cromwell since two days after FTX (and its herd of more than 100 related companies) filed their Chapter 11 bankruptcy petition on November 11. Today, we will shine an even brighter light on those conflicts.
The 8-count criminal indictment against Sam Bankman-Fried by the U.S. Department of Justice makes it clear that pretty much everything Sam Bankman-Fried did involving electronic business communications from 2019 to November 2022 was wire fraud deployed to misappropriate customer deposits and use “those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund, and to make investments” in other companies, most of which were crypto related. If Bankman-Fried was on the premises of Sullivan & Cromwell during that span of time, which appears highly likely since he came to New York for meetings and speaking engagements, there is also the strong likelihood that he engaged in the alleged wire fraud from their premises.
Just being on the premises of Sullivan & Cromwell and using their phones or wi-fi without their knowledge to commit wire fraud might not be a fatal conflict against the law firm, were it not for the fact that Wall Street On Parade has discovered that an inordinate amount of Sullivan & Cromwell’s other current clients appears to have received more than $1 billion of FTX’s misappropriated customer funds.
On December 21, Sullivan & Cromwell filed a large document with the FTX bankruptcy court which included (scroll down) a Declaration by S&C partner Andrew Dietderich. Included in that Declaration was a list of current and former S&C clients who had relationships with FTX and its related companies.
Dietderich provided no specificity on those relationships other than a one-word or two-word description, such as “vendor,” “contract counterparty,” “investments,” “competitor,” etc.
Wall Street On Parade cross-checked those S&C current clients which were designated by the law firm as “contract counterparty” or “investments” with public records and an internal FTX document published by the Financial Times showing investments made by Sam Bankman-Fried’s hedge fund, Alameda Research, or its affiliated units. We discovered seven clients of Sullivan & Cromwell had received loans or investment funds.
Sullivan & Cromwell told the bankruptcy court in a filing that it “is not aware of any conflict between its representation of the Debtors and its representations of its Current Clients or Former Clients that would cause S&C not to be a ‘disinterested person.’ ” But if the funds involved were looted from FTX customers, the funds may have to be clawed back and S&C is hardly in a position to be trusted demanding claw backs from its own customers.
This is what Wall Street On Parade found: (All current client listings are as of December 21, 2022, according to Sullivan & Cromwell.)
BlockFi
BlockFi is another crypto exchange that is a current client of Sullivan & Cromwell. It filed for bankruptcy in November and its court filings indicate that it blames FTX for its own bankruptcy. BlockFi revealed to the court that FTX and Alameda Research owe BlockFi more than $1 billion, consisting of $680 million in a loan that Alameda has defaulted on and $355 million in funds frozen on the FTX crypto exchange.
Anchorage:
Sullivan & Cromwell lists Anchorage as a current client. Anchorage provides infrastructure for institutions to enable crypto custody, exchange, staking and other services. According to the document obtained by the Financial Times, Clifton Bay Investments (formerly known as Alameda Research Ventures) provided $20 million as an equity investment in Anchorage. Public records put the date of that investment in or around December of 2021 – well within the timeframe when federal prosecutors say Sam Bankman-Fried was using customer funds to finance investments by Alameda Research and its venture fund units.
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