FTX Investors Withdraw Lawsuit Against US Law Firm Sullivan & Cromwell

FTX investors have voluntarily withdrawn their class action suit against Sullivan & Cromwell without seeking any settlement. The investors had sued the law firm, accusing it of aiding FTX in carrying out the multibillion-dollar fraud for financial gains.

The class action demanded compensation for damages meted out to investors through civil conspiracy, fiduciary breaches, and aiding and abetting.

FTX Investor Suit Against S&C Dismissed with Zero Settlement

In an exclusive statement, Moskowitz Law Firm, the counsel representing the plaintiffs, said it has removed S&C as a defendant in the case.

Adam Moskowitz, the law firm's founder and managing partner, expects the dismissal to speed up the case's progress. The attorney said there was insufficient evidence to build the case against S&C.

Moskowitz hopes both parties can cooperate to recover the victims' funds from other third parties. He sees the dismissal as a good development for the bankrupt exchange's creditors, allowing them to focus on claiming compensation from FTX and others concerned.

Furthermore, Moskowitz said his law firm will work hard to ensure every victim receives 100% compensation from the 43 parties responsible for the FTX fraud.

According to Moskowitz Law Firm, no settlement was associated with the dismissal. Sullivan & Cromwell oversaw FTX's bankruptcy proceedings and counseled the crypto exchange on several deals.

On February 16, a group of FTX investors filed a complaint against S&C, alleging that it aided and abetted FTX's misconduct and fraud.

The suit claimed S&C ignored the red flags that would have exposed the bankrupt exchange's misconduct and aided it in covering up its misdeeds. The creditors also demanded compensation for their financial loss.

Meanwhile, Sullivan & Cromwell claimed it had limited dealings with the exchange before its bankruptcy. It further claimed to have reported concerns to authorities after learning of FTX's issues.

S&C Did Not Engage in Malpractices That Aided FTX Collapse

The latest dismissal comes after Examiner Robert Cleary exonerated S&C from the malpractice accusations. After his investigations, Cleary found that the law firm didn't ignore red flags that might have helped expose FTX's financial misconduct.

Cleary had investigated S&C's dealings with former FTX CEO Sam Bankman-Fried when he purchased shares in the stock trading platform Robinhood.

The Examiner wanted to ascertain whether the class action claims that S&C helped obscure Bankman-Fried's purchase of Robinhood shares were true.

However, following his cross-examination, Cleary discovered that S&C respected its client's confidentiality by not probing further into the supposed red flags.

After evaluating S&C's explanations and reasons, he found them credible and that, beyond doubt, the law firm did not ignore any red flags.

Judge Dorsey approved the FTX reorganization plan, which will see FTX wind down its operations and repay creditors. The FTX reorganization plan will pay eligible creditors at least 118% of their claim value.

FTX CEO and chief restructuring officer John Ray III said the exchange is ready to return 100% of all bankruptcy claim amounts with interest for non-governmental creditors.

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