By Pam Martens and Russ Martens: January 3, 2023 ~
Thus far, they are the “untouchables.” The law firms that were at the side of Sam Bankman-Fried every step of the way as he built the FTX crypto exchange — an enterprise that Justice Department prosecutor Damian Williams calls “one of the biggest financial frauds in American history.”
Bankman-Fried, the former co-founder and CEO of FTX, has been indicted on eight criminal counts and is wearing a monitoring device as he awaits trial. Caroline Ellison, the former CEO of Bankman-Fried’s now bankrupt hedge fund, Alameda Research, which prosecutors say looted FTX customers’ money, has pleaded guilty to a 7-count criminal indictment. Gary Wang, the former Chief Technology Officer of FTX Trading Ltd., has pleaded guilty to four criminal counts.
What’s happening to the lawyers and the law firms that played pivotal roles in putting this house of cards together? Attorneys at one of those firms, Big Law behemoth Sullivan & Cromwell, are set to collect “between $1,575 and $2,165 per hour for their work” in the bankruptcy proceedings for FTX, according to Reuters.
Yes, despite its intimate role in helping to build the Sam Bankman-Fried house of cards, Sullivan & Cromwell has somehow managed to become in charge of the bankruptcy process of the collapsed firm. According to Bankman-Fried’s draft testimony prepared for a House Financial Services Committee hearing and released by Forbes, “Sullivan & Cromwell was one of the primary external law firms that represented FTX US as well as FTX International” and was calling the shots as the firm collapsed, including picking the new CEO, John Ray. Bankman-Fried was arrested on the day he was scheduled to testify and, thus, did not make it to the hearing to deliver this testimony.
Based on the research of Wall Street On Parade, at the time of the FTX bankruptcy filing on November 11, the General Counsel of FTX.US, the FTX exchange serving customers in the U.S., was former Sullivan & Cromwell partner, Ryne Miller, who had co-chaired the law firm’s commodities, futures and derivatives group and worked at the law firm for eight years prior to joining this upstart crypto exchange.
Another Sullivan & Cromwell partner involved with FTX was Ken Li, who represented FTX.US last year in its acquisition of crypto derivatives firm, LedgerX, which provides trading in crypto futures, options and swaps to both retail and institutional clients.
Sullivan & Cromwell also represented both Alameda Research and FTX in their joint bid to purchase the assets of bankrupt crypto exchange, Voyager Digital Holdings, in 2021. While Sullivan & Cromwell’s website states that it represented FTX.US in its winning bid, the filings in the court case indicate that Sullivan & Cromwell lawyers Andrew G. Dietderich, Brian D. Glueckstein, and Benjamin S. Beller were also representing Alameda Research, Bankman-Fried’s hedge fund that is now alleged to have misappropriated billions of dollars of customers’ funds from the FTX exchange.
Sullivan & Cromwell listed 16 of their attorneys that worked on the deal, writing that: “The S&C team advising FTX US was led by Andy Dietderich and Brian Glueckstein on restructuring matters and Mitch Eitel on financial services matters. The team included Benjamin Beller, Mimi Wu, Christian Jensen, Yuexin Zhu, Jessica Ljustina and Yiming Sun. Ryan Logan, Justin Orr and Jamie Chang advised on intellectual property matters. Jameson Lloyd and HyunKyu Kim advised on tax matters. David Gilberg and Colin Lloyd advised on regulatory matters.”
With FTX and Alameda Research now in bankruptcy themselves, Voyager has announced a new deal with Binance.US to acquire its assets.
Another law firm intimately involved in building Bankman-Fried’s house of cards was Fenwick & West. We know its involvement with Alameda Research dates back to at least 2019 because that is the year in which Fenwick & West entered an appearance to represent Alameda Research in a federal lawsuit alleging that FTX and Alameda had engaged in racketeering activity and crypto market manipulation. The case was Bitcoin Manipulation Abatement LLC v. FTX Trading LTD, Alameda Research LLC, et al and was filed in the Federal District Court for the Northern District of California.
The lead attorney from Fenwick & West in the case was Michael Dicke. Fenwick’s website explains that Dicke “routinely advises clients on corporate governance and disclosure issues. Recently, he has focused on emerging issues in the cybersecurity and cryptocurrency areas, including advising companies and individuals seeking to launch an initial coin offering and entities engaged in cryptocurrency trading.” Prior to joining Fenwick, Dicke “spent over 15 years with the SEC, most recently serving as the Associate Regional Director for Enforcement in the SEC’s San Francisco regional office, from 2008 to 2014,” according to the Fenwick website.
Curiously, after the plaintiff filed an 89-page detailed complaint against FTX, Alameda Research, Sam Bankman-Fried and others in early November 2019, the plaintiff voluntarily dismissed his own case six weeks later.
While Fenwick & West has scrubbed much of its involvement with FTX from its website, we were able to piece together the following:
According to the Global Legal Chronicle, Fenwick & West represented FTX on its October 2021 $420 million Series B-1 capital raise and again on its $900 million capital raise in July of last year.
According to veteran financial writer, Gretchen Morgenson, who now reports for NBC, Fenwick & West drew up the incorporation papers for a company called North Dimension, which was incorporated in Delaware in August 2020. That’s the company where FTX customers were told to wire funds in order to trade on FTX. Instead of the customer funds ending up at FTX, however, they ended up at Bankman-Fried’s hedge fund, Alameda Research. The SEC has charged in a complaint that Alameda then used the funds “indiscriminately to fund its trading operations and Bankman-Fried’s other ventures.”
The new CEO of FTX, John Ray, told the House Financial Services Committee on December 13 that $8 billion of FTX customers’ funds are missing.
Numerous other large law firms were involved with FTX and Alameda Research. Some of those law firms are attempting to draw a dark curtain around those activities.