The Department of Justice (DOJ) is reportedly reconsidering its selection of a prominent New York law firm to handle a key Binance-related assignment, due to the firm’s previous work for rival exchange FTX.
As part of a settlement resolving allegations of AML and sanctions violations, the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) contracted Binance for forensic oversight. This supervision, known as monitoring, would be carried out for three to five years.
Sullivan & Cromwell, the law firm managing the FTX bankruptcy proceedings, was initially appointed as Binance’s independent monitor. The appointment was a condition of a $4.3 billion agreement in which Binance pleaded guilty to violating U.S. money laundering and trade sanctions laws.
Moreover, the monitoring team was to be headed by former federal prosecutor Sharon Cohen Levin, a partner at the firm.
Concerns about Sullivan & Cromwell
However, Bloomberg reported Tuesday that Justice Department officials have raised concerns over criticism directed at the law firm over its previous work for FTX, which at one point was a competitor to Binance.
In light of these concerns, the department is evaluating alternative candidates for the monitoring position. According to sources inside, FinCEN still intends to appoint Sullivan and Cromwell.
Law firm faces fraud investigation
Sullivan & Cromwell represented a defunct cryptocurrency exchange before its collapse and during a Chapter 11 proceeding. The firm then submitted invoices for its services in excess of $170 million.
These included locating billions of dollars in assets to facilitate debt recovery. In February, FTX investors filed a class action lawsuit against the law firm, alleging its complicity in an $8 billion fraud.
The lawsuit indicated that Sullivan & Cromwell’s advisory role to FTX in 2021 and 2022 provided it with a unique point of view. It may have allowed the firm to gain deep insight into the intricate organizational structure of FTX entities.
Last month, a U.S. bankruptcy judge authorized Robert J. Cleary, a prosecutor known for his role in the Unabomber case , to investigate Sullivan & Cromwell’s potential conflict of interest in connection with its work for FTX.
