Risk Update

Lawyer Conflicts Allegations & Concerns — $100m Conflicts Allegation, Crypto Conflicts Concerns

Client Says Kasowitz Benson Torres Owes $100M for Alleged Conflict of Interest” —

  • “Kasowitz Benson Torres was named a defendant in a summons in New York state court Wednesday by a real estate investment client seeking at least $100 million in relief. The Am Law 200 firm and a former partner were allegedly acting in the interest of parties adverse to the client in a real estate development project.”
  • “Kasowitz Benson and partner Douglas Heitner are accused of acting against the interests of client 111 West 57th Investment and affiliated entities throughout the financing of a real estate development project for the benefit of the firm’s longtime clients, including sponsors, managers and developers involved in the project.”
  • “The firm’s allegedly conflicted loyalties, particularly in a 2017 strict foreclosure dispute, led to the loss of an ‘extremely valuable asset’ for 111 West 57th Partners, an affiliated entity of 111 West 57th Investment listed as a plaintiff, according to the summons.”
  • “On Thursday, a representative of Kasowitz provided the following response to the summons. ‘This threatened lawsuit is yet another meritless filing by a serial litigator now on his sixth set of lawyers who has met defeat repeatedly in state and federal court in numerous lawsuits he has filed related to his failed investment in this groundbreaking 57th Street project, including suits against lenders, insurers, partners and now apparently law firms. Kasowitz has never even represented this person, let alone done anything wrong, and will seek sanctions if any complaint is frivolously filed. Indeed, filing a summons and notice with a ludicrous monetary demand in order to seek headlines is itself unethical and improper which we will address in the appropriate forum.'”

US Prosecutors Call for Hearing Amid Potential Conflict of Interests in Alex Mashinsky and SBF Cases” —

  • “The US government raised concerns about potential conflicts of interest in the ongoing criminal cases of FTX and Celsius Network founders Sam Bankman-Fried and Alex Mashinsky on February 6. The area of concern surrounds the legal representatives handling both cases.”
  • “In a court filing, the US government outlined its concerns to Judge Lewis Kaplan in the Celsius and FTX cases and their founders.”
  • “In the document, the US prosecutors requested a Curcio hearing to address a conflict of interests in both cases. The decision ensued upon the identification of Marc Mukasey and Torrey Young as legal counsels representing Celsius Network founder Alex Mashinsky, and Sam Bankman-Fried (SBF), the disgraced CEO of FTX.”
  • “The two attorneys were said to have previously filed a notice of appearances for SBF on January 9 and now represent Alex Mashinsky. Given this, the prosecuting team has requested a hearing for the defendants to waive their rights to be represented by the attorneys.”
  • “Additionally, the core objective of the Curcio hearing is for the court to determine the severity of the conflict and how to proceed. The court could dismiss both counsels if a major conflict of interest is identified.”
  • “In the ongoing legal case with the US government, Celsius’ founder Mashinsky has admitted lending funds to FTX subsidiary Alameda Research. In return, Alameda Research paid back these loans using customers’ funds. Given that Alameda Research, FTX, and Celsius are standing trial for criminal charges, US prosecutors have stated that this could present a strong ground for conflict of interest.”
  • “If legal materials could cause rifts between both parties, the current legal representatives will be limited in sharing such information. Both defendants were found guilty of multiple criminal charges involving fraud and promoting unregistered security tokens. SBF is set for a trial sentencing on March 28.”