Risk Update

Conflicts News — Crypto Conflicts Clash Continues, Law Firm Conflicts Allegation Settlement Costs

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“FTX seeks to reassure court on bankruptcy lawyers’ potential conflicts” —

  • “A U.S. judge on Friday signed off on FTX’s choice of legal advisers to navigate its bankruptcy, after the collapsed crypto exchange told the court it had reached an agreement with the U.S. Department of Justice removing one of the biggest obstacles to the law firm’s appointment.”
  • “The U.S. Trustee, the Justice Department’s bankruptcy watchdog, and two of FTX’s creditors had objected to FTX hiring Sullivan & Cromwell, arguing the New York law firm had not disclosed sufficient information about its past ties to FTX. These ties, they said, include the fact that FTX’s U.S. general counsel, Ryne Miller, is a former partner at the firm.”
  • “Dorsey said the objectors had not shown that there was an active conflict of interest between FTX and the firm, and to the extent that conflicts could arise there were procedures in place to deal with that.”
  • “Former top FTX attorney Daniel Friedberg had also opposed Sullivan & Cromwell’s hiring in court filings on Thursday, saying that the law firm had overbilled for legal work and had conflicts of interest stemming from its connections to Miller.”
  • “FTX creditor Warren Winter asked Dorsey to delay Sullivan & Cromwell’s approval until Friedberg’s allegations were investigated. The judge denied the request, saying that Friedberg’s court filing was not properly presented to the court and ‘full of hearsay, innuendo, speculation and rumors.'”
  • “Sullivan & Cromwell has told the court it should not be disqualified simply because it performed some pre-bankruptcy work for FTX. A Sullivan & Cromwell spokesperson has said the firm had a ‘limited and largely transactional’ relationship with FTX prior to the bankruptcy and never served as primary outside counsel to any FTX entity.”

“Tulare hospital board settles suit against former attorney and law firm” —

  • “The Tulare Local Healthcare District now has $3 million more in its bank account after settling a lawsuit against Bruce Greene – its former attorney – and the firm he works for, Baker Hostetler.”
  • “The settlement doesn’t impact charges that the Tulare County District Attorney’s office has brought against Greene centering around his time working for Tulare and the district’s former management partner, Healthcare Conglomerate Associates (HCCA), and it doesn’t impact a California State Bar complaint lodged by the district against Greene.”
  • “Kevin Northcraft, the district board’s president, told the Valley Voice that the settlement amount was nearly equal to what the district had paid Greene and the Baker firm.”
  • “‘We have 88,000 people in our district, and they were all harmed by this law firm,’ he said. ‘Getting back virtually everything we paid them is some justice for the people that were harmed.'”
  • “The lawsuit alleged that Greene and the Baker firm breached their fiduciary duty to act in the best interest of the district by drafting a resolution that would allow HCCA to seek $22m in loans on the district’s behalf, among other claims.”
  • “The lawsuit also claimed Greene and the firm were professionally negligent by allegedly failing to disclose the potential conflicts of interest in representing HCCA, its owner Benny Benzeevi, and the district at the same time.”