The court-appointed examiner, Robert J. Cleary, has released a detailed report recommending additional investigations into several aspects of the collapsed FTX Group, particularly focusing on FTX.US, its asset management practices, and its legal representation by Sullivan & Cromwell (S&C).Cleary’s report, submitted to the US Bankruptcy Court for the District of Delaware, outlines the necessity of three primary investigations to further clarify the circumstances surrounding FTX Group’s downfall.The first key recommendation centers on FTX.US balance sheet shortfalls. The report highlights significant concerns over recurring “holes” or shortfalls in FTX.US’s balance sheet.These gaps, particularly evident in November 2022, suggest possible commingling of customer and corporate assets — indicating a potential misuse of funds.The examiner emphasized the need for a comprehensive investigation to determine the causes, frequency, and resolution of these shortfalls, which may uncover additional misconduct and bolster public confidence in the bankruptcy process.The examiner also recommended a probe into the pre-bankruptcy sale of Ledger Holdings Inc. (LHI) to West Realm Shires Inc., seeking to identify potential avoidance actions against former shareholders who might still hold claims against the estate.The inquiry could provide deeper insights into the transactions leading up to the bankruptcy and uncover additional assets for recovery.The examiner called for a focused inquiry into the role of Sullivan & Cromwell LLP (S&C), the law firm representing FTX, particularly concerning its representation of Sam Bankman-Fried during his purchase of Robinhood shares.The investigation aims to determine whether S&C was aware of the fraudulent activities within FTX and whether there were any conflicts of interest that the court should have considered when approving their retention as counsel.If S&C’s representation of Samuel Bankman-Fried during his purchase of Robinhood Markets shares is found to be improper or conflicted, it could have legal and financial implications for Bankman-Fried and other individuals involved.This might include revisiting the transactions and potentially reversing or renegotiating terms. It would also disqualify the law firm from representing debtors further in the bankruptcy proceedings.S&C’s broader representation of FTX has generated significant controversy. Bankman-Fried claimed S&C pressured him into bankruptcy to earn legal fees in December 2022, while former FTX CTO Daniel Friedberg alleged misconduct in January 2023.Reports in 2023 indicated that S&C billed FTX approximately $70 million over five months of bankruptcy proceedings. As of April 2024, the firm has charged $170 million in cumulative fees, according to Bloomberg.The matter entered civil courts in February 2024, as former FTX investigators filed a class action suit alleging the firm aided FTX’s wrongdoing.Before transitioning to crypto writing in 2018, Mike studied library and information sciences. Currently, he resides on Canada’s West Coast.AJ, a passionate journalist since Yemen’s 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting. Get the latest crypto news and expert insights. Delivered to you daily.Courts dismissed the case without prejudice, leaving Musk an option to refile the case at a later date.The S-1 filing follows the SEC’s approval of NYSE Arca’s proposed rule change on behalf of ProShares.Rob Marrocco believes crypto ETFs beyond Bitcoin and Ethereum are unlikely without first establishing a futures market or changing regulation.Ripple said Standard Custody CEO Jack McDonald would help the firm achieve its USD-backed stablecoin plans.CryptoSlate’s latest market report dives deep into the effects corporate Bitcoin purchases have on the market.Disclaimer: Our writers’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.
