In a recent report by examiner Robert Cleary, it was determined that Sullivan & Cromwell LLP did not overlook crucial "red flags" regarding FTX when advising its CEO, Sam Bankman-Fried, on the acquisition of Robinhood shares. This finding contradicts earlier recommendations for a probe into the law firm's actions during the transaction.
Cleary's report, published in May, raised questions about the law firm's representation of Bankman-Fried in relation to his purchase of shares from Robinhood Markets, Inc. Notably, Sullivan & Cromwell is currently involved in FTX's ongoing bankruptcy proceedings, which began in 2022.
According to the report, Sullivan & Cromwell's actions were found to be compliant, as they did not ignore any indications of misconduct. Cleary stated that the firm did not have a "disqualifying conflict" when advising Bankman-Fried during the acquisition.
In April 2022, Ryne Miller, General Counsel for FTX.US, reached out to Sullivan & Cromwell regarding a potential acquisition. The inquiry was considered routine, given the ownership structure of FTX.
During interviews, S&C attorneys expressed that they did not suspect any wrongdoing based on Miller's inquiry, noting that wealthy individuals often rely on corporate representatives for investment decisions.
As part of the acquisition process, a Form 13D filing would be necessary to disclose ownership over 5% of a company's shares. Miller indicated that he was comfortable with being named in this filing, however, he preferred that Alameda not be mentioned.
Cleary concluded that Sullivan & Cromwell's decision not to pursue further inquiries regarding this confidentiality was reasonable under the circumstances.
