FTX investors have decided to back down from their legal battle against Sullivan & Cromwell.
The group, which had previously accused the law firm of playing a part in the multi-billion-dollar fraud linked to FTX, officially informed a federal court in Miami on Wednesday that they were withdrawing their proposed class action lawsuit.
Bankruptcy examiner’s report clears Sullivan & Cromwell
The lawsuit, which had been launched against Sullivan & Cromwell, accused the firm of having deep involvement with FTX’s shady operations before the exchange’s collapse.
Sullivan & Cromwell had represented FTX in around 20 legal cases before the company’s dramatic downfall.
The change in the case largely came from findings shared by FTX bankruptcy examiner Robert Cleary.
According to Adam Moskowitz, the lead counsel for the FTX investors, Cleary’s investigations, which were published in reports from May and September, didn’t reveal any wrongdoing by Sullivan & Cromwell.
They instead showed that the law firm didn’t engage in or ignore any suspicious activities when it worked with FTX or its founder, Sam Bankman-Fried.
Moskowitz told Reuters that “no claims at this stage” could be pursued. After that, the investors realized there was no point in continuing their legal fight.
Sullivan & Cromwell was quick to issue a statement following the withdrawal of the lawsuit, calling the claims “meritless.”
FTX’s bankruptcy plan and repayment strategy
FTX declared bankruptcy in November 2022, after billions of dollars in customer deposits vanished from its accounts.
U.S. Bankruptcy Judge John Dorsey, who is overseeing the case in Wilmington, Delaware, approved FTX’s bankruptcy plan at a court hearing last week.
He praised the plan as a model for dealing with a complex bankruptcy case like FTX’s, which has been anything but straightforward.
The plan outlines many settlements, including agreements with FTX customers, creditors, U.S. government agencies, and liquidators.
According to the plan, FTX’s top priority is repaying its customers, specifically those who held $50,000 or less on the platform.
These customers are expected to receive their funds within 60 days of the plan’s effective date, though the exact date has not yet been determined, but it reportedly covers 98% of customers.
FTX estimates that it will have between $14.7 billion and $16.5 billion available. It is expected to cover at least 118% of the value in customer accounts.
FTX and its new leadership, including CEO John Ray, have emphasized that this recovery was only possible because of the hard work of the team handling the bankruptcy.
According to Ray, the team worked tirelessly to rebuild FTX’s financial records from scratch and tracked down assets that had gone missing when the company collapsed.