“Just a quick estimate of how much petition date is going to pay us versus current value,” the activist said.

The report falls amid boiling excitement about FTX starting October distributing $16 billion to its creditors. Especially, this is yet unverified since court confirmation is still pending on the choice of restructuring for the clients of the exchange. October 7 is the court hearing day assigned for this.

“The decision regarding the restructuring plan for FTX customers will not be made until October 7. Because the court hearing related to it is scheduled for that date. Personally, I could not find any information about what form of repayment it will be, crypto or cash, and this is very important in the context of withdrawals from the cryptocurrency market,” CryptoTrail stated.

It comes barely two months after the court decided on a $12.7 billion payback schedule. Still, the court barred FTX and Alameda Research, its affiliate, from trading digital assets and did not impose any civil monetary punishment. After a US trustee protested, claiming more fair distribution among creditors, the reorganization proposal remains under debate. Sunil Kaviri, among FTX creditors, had also objected to the reorganization plan prior to the US Trustee’s intervention. The main points of dispute are that the plan lacks in-kind client distribution choices and has extensive exculpation clauses.

“It is painfully apparent that the Debtors’ proposed plan will inflict additional hardships on customers through forced taxation that could be avoided by making an ‘in kind’ distribution,” the creditors said.

The US Securities and Exchange Commission (SEC) questioned the strategy in a similar vein. It called for changes, including eliminating the discharge clause. Should the exchange fail to implement these modifications, the securities regulator promised to oppose the confirmation of the scheme.

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FTX Creditors Are Not Taking A Step Back

Prior concerns raised by senators, FTX creditors, and the exchange’s former CEO regarding the law firm’s close relationship with FTX prompted this class action lawsuit, questioning the firm’s impartiality.

The lawsuit argues that Sullivan and Cromwell’s extensive history with FTX prior to its collapse makes them partly responsible for the exchange’s actions. It points to multiple instances where the firm served as outside counsel for FTX, suggesting this granted them insight into FTX’s operations and enabled support for its fraudulent behavior.

During the 16 months leading up to FTX‘s collapse, Sullivan and Cromwell billed around $8.5 million in fees while serving as FTX’s primary legal counsel.

Allegations include claims that Ryne Miller, a lawyer who transitioned from Sullivan and Cromwell to FTX as General Counsel in 2021, advocated for directing business to Sullivan and Cromwell as outside counsel. This resulted in 20 engagements, including FTX’s efforts to acquire assets from crypto exchange Voyager and LedgerX.

The lawsuit further alleges that Sullivan and Cromwell represented a special purpose vehicle called Emergent, which used FTX customer funds to buy Robinhood stock, and also represented former FTX CEO Sam Bankman-Fried.

Based on insights from FTX insiders, the lawsuit asserts that Miller was aware of a “back door” in FTX’s platform enabling the funneling of customer funds to Alameda and shared this information with multiple individuals at Sullivan and Cromwell.

Additionally, the lawsuit highlights Sullivan and Cromwell’s substantial financial gains from overseeing the FTX bankruptcy proceedings. Their reported income exceeding $180 million since taking a leading role in the proceedings represents 10% of the firm’s total revenue for 2022. Paralegals reportedly billed up to $595/hr, while partners billed up to $2,165/hr.

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