FTX Judge Backs Firm’s Lawyers, Rejects Last Minute ‘Rumors’

The judge who oversaw the bankruptcy of FTX Group declined to replace the law firm dealing with the chapter 11 case of the bankrupt cryptography company, conclude that the last-minute attacks on the lawyers were nothing more than "rumours."

US Bankruptcy Judge John Dorsey approved what is normally a routine request to hire a law firm — in this case, Sullivan & Cromwell, whose lawyers have handled some of the biggest insolvency cases filed in recent years.

Dorsey refused to allow a former FTX lawyer, Daniel Friedberg, to testify or agree to his last-minute court filing, which resulted in a number of allegations of conflict of interest against the law firm. "There's no proof of a real conflict here," Dorsey said at the hearing in Wilmington, Delaware.

Friedberg filed a statement on Thursday following the deadline which was filled with "hearsay and rumors," Dorsey said. It's "certainly not something that I would allow to be presented in evidence anyway".

The statement says that Friedberg asked Sullivan.

“S&C has repeatedly refused this request and attempted to muzzle me in an effort to avoid me raising issues adverse to S&C,” Friedberg said. "I think that is completely inappropriate and I should be allowed to freely assist the police in these circumstances."

Friedberg was unwilling to comment. 

Stone Throwing

Two FTX lenders charged Sullivan. These creditors are represented by a law firm that pursues the founder of FTX, Sam Bankman-Fried, and other executives of the company.

Their lawyer, Marshal J. Hoda, requested that Dorsey let Friedberg testify by zoom. The judge refused, saying that the witnesses have to be present in the hearing room. 

Friedberg has a “checkered past” because he was the chief compliance officer at FTX at the time its founder and other top officials were involved in the alleged fraud that brought down the company, said Sullivan & Cromwell attorney James Bromley.

They cannot throw stones at the office of the United States Attorney. They can throw stones at the debtor's lawyer who is providing information to prosecutors and regulators," he said, referring to Friedberg and Bankman-Fried.

"And this is precisely what's going on."

They're big law firms, chapter 11 instances as ftx, are seldom withdrawn by the judge unless there is clear evidence that counsel have a direct dispute that cannot be resolved.

In court, bromley also raised concerns about the new management of ftx criticized on twitter by bankman-fried, To think it was like fighting "a ghost" and not being able to answer criticism. In court, Bromley also raised concerns that Bankman-Fried had been critical of FTX's new management on Twitter, To think it was like fighting "a ghost" and not being able to answer criticism. 

"It's very hard, Your Honor, to cross-question a Tweet." Bankruptcy Court for the District of Delaware.

— With assistance by David Voreacos