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SBF says Sullivan & Cromwell contradicted itself with insolvency claims

January 19, 2023No Comments


Law firm Sullivan & Cromwell contradicted itself when it claimed that closed-end crypto exchange FTX US is insolvent, former CEO Sam Bankman-Fried claimed in a Jan. 17 blog post shared on Twitter.

The law firm was retained by the FTX Group to handle bankruptcy proceedings for several of its subsidiaries, including FTX International, Alameda Research, and FTX US. However, Bankman-Fried has stated on several occasions that believes that FTX US is solvent and should not have declared bankruptcy.

In a sentence archived Before the United States Bankruptcy Court for the District of Delaware on January 17, Sullivan and Cromwell reiterated its assertion that FTX US is not creditworthy, stating: โ€œThe assets identified as of the date of the petition are substantially less than the total third-party customer balances suggested by the electronic ledger for FTX USโ€.

In its post, SBF denied this claim, stating that the law firm has contradicted itself:

โ€œLater in the same report, S&C reveals that FTX US has an additional $428 million in bank accounts, on top of the $181 million of tokens, for approximately $609 million of total assets. [โ€ฆ] therefore, FTX US had at least $111 million, and likely about $400 million, of excess cash on top of what was required to match customer balances."

The former CEO concluded from this that โ€œFTX US is solvent. Clients must have access to their funds.โ€

SBF resigned as CEO of the cryptocurrency exchange on November 11, and John J. Ray III was appointed as the company's replacement CEO. On December 13, SBF was accused of fraud by the US Securities and Exchange Commission in connection with the bankruptcy of FTX. The SEC alleged that it โ€œorchestrated a years-long fraud to hide it from FTX investors.โ€ [โ€ฆ] the undisclosed diversion of FTX client funds to Alameda Research LLC, its private crypto hedge fund.โ€ Bankman-Fried has pleaded not guilty and is awaiting trial.

After being released on bail, SBF began posting blog posts to the substack starting January 12, but many in the crypto community have been unimpressed with his writings.