Senators' letter to FTX lawyers deemed 'inappropriate' by a judge

By: Henry Felix

January 12, 2023 8:05 AM

Judge John Dorsey of the Bankruptcy Court deemed the bipartisan letter "inappropriate." "that it won't factor into his selection of an impartial auditor.

Reportedly, the bankruptcy judge assigned to the FTX case has lambasted the four senators' letter demanding for an independent examiner.

As previously reported that senators had written to express worry over FTX's relationship with its legal counsel, Sullivan & Cromwell LLP.

U.S. Bankruptcy Court for the District of Delaware Judge John Dorsey, however, deemed the letter "improper ex parte communication" and stated at a hearing on January 11 that he would not consider it.

He was quoted as saying during the hearing that "I will reach my conclusions on the matters based entirely upon admissible evidence and the arguments presented in open court," as reported by Law360 on January 11.

Senators John Hickenlooper, Thom Tillis, Elizabeth Warren, and Cynthia Lummis wrote a letter to Judge Dorsey on January 9 in which they questioned the nomination of Sullivan & Cromwell LLP as counsel to FTX and advocated for the appointment of an independent examiner.

On December 12th, the U.S. Trustee submitted the aforementioned motion.

In their letter, the senators raised concerns about a potential conflict of interest, citing the firm's history of providing legal assistance to FTX and the fact that some of its former employees now work for the company.

According to a statement sent to Cointelegraph by a representative of Sullivan & Cromwell, the firm has "never served as key outside counsel to any FTX corporation," making it "disinterested" within the terms of the United States Bankruptcy Code."

The judge's decision to ignore the senators' letter is not indicative of whether or not he will rule against FTX's request for an independent examiner or Sullivan & Cromwell's appointment as counsel.

FTX creditor Warren Winter's attorneys filed an amended objection to Sullivan & Cromwell's appointment on January 10th, arguing that the appointment could undermine public faith in the bankruptcy process and that the law firm was a "target for investigation" regarding its own "potential liability." The judge will still need to review this objection.

Bankruptcy courts frequently hire independent examiners to analyze the specifics of complex matters brought before them and give findings and opinions from an objective perspective.

During the subprime mortgage crisis, they were appointed in the high-profile bankruptcies of Lehman Brothers and the cryptocurrency exchange Celsius.