FTX’s revised proposal, which promised significant compensation, has faced criticism from creditors due to a specific clause involving law firm Sullivan & Cromwell (S&C). The clause in question is an exculpatory provision that releases certain parties from liability in the event of damages during the bankruptcy process. According to Sunil, a prominent FTX creditor and member of the FTX Customer Ad-Hoc Committee, S&C may have included this clause to protect themselves from potential liabilities. The inclusion of this controversial clause comes after the top creditors of FTX filed a lawsuit against S&C, accusing the firm of actively participating in FTX Group’s fraudulent activities and benefiting financially from the fraud. The century-old law firm, Sullivan & Cromwell, is overseeing the FTX bankruptcy proceedings and has previously served as outside counsel for the exchange in various deals, earning significant payments for its services. FTX reportedly owes the S&C law firm up to $1.45 billion in legal bankruptcy fees. FTX’s amended plan has sparked outrage among crypto investors, primarily due to the exculpatory clause, which could lead creditors to vote against it. Rob, a pseudonymous FTX creditor and head of growth at Paradex, expressed his disapproval of the plan, highlighting that the compensation offered is based on a Bitcoin price of $16,800, which has significantly appreciated since the collapse. According to Mike Belshe, the CEO of BitGo, none of the FTX creditors will accept this compensation structure.
New FTX proposal clears bankruptcy law firm S&C of any wrongdoing