Bankruptcy law firm S&C absolved from misconduct, according to new FTX proposal

While FTX’s new amended proposal promised “billions in compensation,” creditors are unhappy with a particular clause related to law firm Sullivan & Cromwell (S&C).FTX’s new amended proposal to repay creditors, released on May 7, contains an exculpatory clause, which is a provision that relieves certain parties of liability if damages are caused during the execution of the bankruptcy process.In the case of FTX, S&C may have included the clause to absolve themselves from any potential liabilities, according to popular FTX creditor Sunil, who is part of the largest group of over 1,500 FTX creditors, the FTX Customer Ad-Hoc Committee.In a May 8 X post, Sunil wrote:The controversial clause comes nearly three months after the top FTX creditors sued bankruptcy firm S&C. The creditors alleged that S&C took an active part in the “FTX Group’s multibillion-dollar fraud,” claiming the firm benefited financially from FTX’s fraud. A Feb. 16 court filing states: Sullivan & Cromwell is the century-old law firm overseeing the FTX bankruptcy proceedings. Previously, the firm reportedly served as outside counsel to the exchange in several deals, including FTX’s bid for the assets of Voyager Digital and its acquisition of LedgerX, receiving significant payments for its services.FTX owed up to $1.45 billion in legal bankruptcy fees to the S&C law firm, according to compensation filings from December 2023.Related: First Bitcoin-backed synthetic dollar to launch with 25% yieldWill FTX’s amended plan be turned down?FTX’s new plan caused widespread outrage among crypto investors, mainly due to the exculpatory clause, which could prompt creditors to vote no, including pseudonymous FTX creditor Rob, who is also the head of growth at Paradex. In a May 8 X post, Rob wrote:While FTX debtors said they would give over 98% of creditors an 11% payout, plus “billions in compensation” to the rest, some don’t consider this unfair, considering that debtors are compensating holders based on a $16,800 Bitcoin (BTC) price, which has appreciated significantly since the collapse.None of the FTX creditors will accept this compensation structure, according to Mike Belshe, the CEO of BitGo, who wrote in a May 8 X post:Related: FTX addresses transferred $8.3M one day before amended proposal deadline