In January 2023, the U.S. trustee overseeing the bankruptcy objected to FTX’s retention of the same law firm post-collapse. FTX’s new CEO regarded any conflicts of interest as irrelevant because he attributed all wrongdoing to Sam rather than the lawyers and he was ultimately successful in retaining them. Now the U.S. trustee is objecting to their proposed reorganization plan for, among other reasons, giving themselves an excessive amount of legal immunity:
Vara also makes a number of more technical legal arguments, but most significant may be his case against the “impermissibly broad” exculpation, or forgiveness of any wrongdoing, afforded by the plan to the estate’s administrators and advisors. “Such immunity would far exceed the protections that estate professionals whose employment and compensation are subject to Court approval and oversight [under the relevant statutes] receive during the case,” Vara wrote.
FTX’s bankruptcy, meanwhile, is under investigation by prosecutor Robert Cleary, an independent examiner appointed to the case after an initial ruling denying the appointment was overturned.
Some creditors file their own complaint
Sunil Kavuri, a representative of the largest FTX creditor group who had previously urged his fellow creditors to vote against the plan, filed his own complaint alongside two others as representatives of FTX’s retail customers.
Kavuri’s filing also takes issue with the plan’s overly broad exculpatory provisions. “The definition of Exculpated Parties is overbroad, and as set forth below, inconsistent with controlling case law because it is not limited to estate fiduciaries,” the filing states.