Editor’s Update: Two days after Wall Street On Parade published this article, Judge Abrams decided to recuse herself from this case, writing as follows:

“It has come to the Court’s attention that the law firm of Davis Polk & Wardwell LLP, at which my husband is a partner, advised FTX in 2021, as well as represented parties that may be adverse to FTX and Defendant Bankman-Fried in other proceedings (or potential proceedings). My husband has had no involvement in any of these representations. These matters are confidential and their substance is unknown to the Court. Nonetheless, to avoid any possible conflict, or the appearance of one, the Court hereby recuses itself from this action. See 28 U.S.C. § 455. SO ORDERED. Dated: December 23, 2022 New York, New York.”

Clearly, not all of these matters were “confidential,” as Judge Abrams states above. The BlockFi deal appeared on the Davis Polk website and took us all of 30 seconds to locate. If Judge Abrams had invested the same 30 seconds of her time, she wouldn’t have put either herself or this federal district court in this embarassing position.

~~~

By Pam Martens and Russ Martens: December 21, 2022 ~

Last week the New York Times did a puff piece on the judge that will be presiding over the Sam Bankman-Fried criminal trial in the Federal courthouse in lower Manhattan. The judge is Ronnie Abrams. The narrative at the New York Times is that Abrams’ “husband, Greg Andres, is an accomplished former Brooklyn federal prosecutor….”

Our take is that Greg Andres is part of Ronnie Abrams’ immediate household and a law partner of Davis Polk & Wardwell LLP, a law firm that has problematic ties to Bankman-Fried’s bankrupt crypto exchange, FTX, and another crypto firm it became enmeshed with, BlockFi, which is also now in bankruptcy.

According to the Davis Polk website, the following occurred in July of this year:

“Davis Polk advised BlockFi, Inc. as borrower under a $400 million loan facility provided by West Realm Shires Inc, an affiliate of FTX-US. Davis Polk also advised BlockFi, Inc. in connection with an option for FTX-US to acquire BlockFi at a variable price of up to $240 million based on performance triggers…

“FTX is a leading cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018 by Sam Bankman-Fried, FTX offers a range of trading products, including derivatives, options, volatility products and leveraged tokens.

“The Davis Polk corporate team included partner Michael Davis and associates Brian Lee and Malik M. Khalil. The finance team included partners Meyer C. Dworkin and Christopher Nairn-Kim, counsel Erika D. White and associate Matthew Vallade. Partners Lucy W. Farr and Corey M. Goodman and associate Yixuan Long provided tax advice. All members of the Davis Polk team are based in the New York office.”

At the very time that Davis Polk wrote that “FTX is a leading cryptocurrency exchange” it was in reality embezzling billions of dollars from its own customers according to the U.S. Department of Justice. The peculiarly named West Realm Shires Inc. that was involved in the BlockFi deal is majority-owned by Sam Bankman-Fried.

While hopefully doing some type of due diligence for their client, BlockFi, ten Davis Polk lawyers did not, apparently, stumble upon the fact that BlockFi was accepting an option for a potential buyout with what Damian Williams of the U.S. Department of Justice now calls “one of the biggest financial frauds in American history.” Sam Bankman-Fried, CEO of FTX at the time this deal was put together, now faces eight criminal counts which have the potential to put him in prison for life.

And the best the Federal district court for the Southern District of New York can offer up as a judge to preside over the criminal trial is the wife of a law partner at Davis Polk.

Davis Polk also represented the crypto exchange, Binance, and its CEO, Changpeng Zhao, in a securities class action against the firm. On March 31 Davis Polk won dismissal of that case, Lee, et al. v. Binance, et al., 1:20-cv-2803-ALC, which was also situated in the Federal district court in the Southern District of New York.

Binance and Zhao also have highly problematic ties to FTX and Sam Bankman-Fried. Bankman-Fried blames Zhao for backing away from a deal to buy FTX in November for the collapse of FTX. The two have engaged in a war of words on Twitter, with Zhao calling Bankman-Fried a “fraudster” while Bankman-Fried calls Zhao a liar.

This would not be the first time that Judge Ronnie Abrams has presided over a high-profile case while overlooking a conflict of interest on the part of her husband and his law firm.

In 2014 Judge Abrams dismissed a whistleblower case brought by Carmen Segarra, a bank examiner at the New York Fed, who credibly alleged she was fired after refusing to change a negative examination of Goldman Sachs. Just 20 days before Judge Abrams issued her written decision, she convened a phone conference with lawyers on both sides. She alerted them that it had just come to her attention that her husband, Greg Andres, “was representing Goldman Sachs in an advisory capacity” according to the telephone conference transcript.

Following that telephone conference, Segarra’s lawyer, Linda Stengle, filed a letter with the court asking for a more complete disclosure of the Judge’s husband’s relationship with Goldman Sachs. The New York Fed responded with its own letter, writing: “Plaintiff’s request for additional disclosures raises concerns about the appearance of a different sort of impropriety: forum shopping…Under these circumstances, the Court should deny Plaintiffs request for additional disclosures and proceed with the case.” (See FRBNY Response to Segarra Request for Filing Amended Complaint.)

Judge Abrams went on the offensive, adopted this line of reasoning, and accused Stengle of “judge-shopping” in her written decision tossing out the case. It was a bizarre position to take since Stengle had not asked the Judge to recuse herself.

Wall Street On Parade found the following interesting background details at the time we wrote about that case:

Judge Abrams also worked at Davis Polk just prior to taking the bench in 2012;

U.S. Senator Kirsten Gillibrand, who recommended Abrams to President Obama for the Judgeship and spoke on her behalf at her confirmation hearing, also previously worked at Davis Polk;

Davis Polk was the second largest contributor to Gillibrand’s 2012 Senate race, according to the Center for Responsive Politics, with its lawyers, employees and/or PACS contributing $333,100;

One of the lawyers representing the New York Fed in the Segarra matter, Thomas Noone, previously worked at Davis Polk and his employment there overlapped with that of Judge Abrams;

Davis Polk previously represented the New York Fed in significant matters;

How big a retainer the Judge’s husband received from Goldman Sachs and when he received it did not come to light. What we did discover is that Goldman Sachs was a large, long-term client at Davis Polk.

As we have previously recommended, an independent investigation of the federal district court for the Southern District of New York needs to happen – sooner rather than later. (See The Carmen Segarra Case: Welcome to New York, Wall Street and McJustice and Goldman Sachs Beats Another Fraud Rap: Can the Public Ever Get Justice in New York Courts? and JPMorgan Chase Quietly Settles Whistleblower Case Involving Charges of Keeping Two Sets of Books and Improper Payments to Tony Blair.)