Jan 20 (Reuters) – A U.S. judge on Friday approved FTX’s choice of legal counsel to navigate its bankruptcy, after the crashed crypto exchange told the court it had reached a settlement that resolved the concerns of the US Department of Justice regarding potential conflicts of interest. .

The US Trustee, the Justice Department’s bankruptcy watchdog, and two of FTX’s creditors had asked US Bankruptcy Judge John Dorsey in Wilmington, Delaware, not to approve the hiring of Sullivan & Cromwell by FTX, arguing that the New York law firm had failed to disclose enough information about their previous ties. to FTX.

These ties, they said, include the fact that FTX’s US general counsel, Ryne Miller, is a former partner at the firm.

The US trustee and a Sullivan & Cromwell attorney representing FTX told Dorsey at a hearing on Friday that the firm and the exchange provided the Justice Department with additional information about the firm’s pre-bankruptcy work. , which satisfied the concerns of the department.

Dorsey said that the objectors had not shown that there was an active conflict of interest between FTX and the company, and to the extent that conflicts might arise, there were procedures in place to deal with them.

Former FTX Lead Counsel Daniel Friedberg he had also opposed the hiring of Sullivan & Cromwell in court filings on Thursday, saying the law firm had overcharged for legal work and had conflicts of interest stemming from its connections to Miller.

Miller tried to “funnel a lot of business to S&C” and “looked forward to returning as an S&C partner” after his time at FTX, Friedberg wrote.

FTX creditor Warren Winter asked Dorsey to hold off approving the company until Friedberg’s allegations were investigated.

The judge denied the request, saying that Friedberg’s court filing was misrepresented in court and was “full of hearsay, innuendo, speculation and hearsay.”

FTX has rejected the objections in court filings this week, saying it trusts Sullivan & Cromwell for high-risk work, such as securing client assets and sharing information with US prosecutors and regulators.

Forcing him to find new lawyers, FTX has said, would disrupt efforts to clean up the mess left behind by founder Sam Bankman-Fried, who has been charged by US prosecutors for orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.

Bankman-Fried, who has pleaded not guilty, has repeatedly attacked Sullivan & Cromwell since the FTX implosion, claiming that the firm’s lawyers forced it into filing for bankruptcy and handing over control of the company. The firm called those allegations false in court papers this week.

The firm also took aim at Friedberg’s presentation at Friday’s hearing, accusing him of participating in efforts by Bankman-Fried to undermine the firm.

“They can’t throw stones at the US Attorney’s Office, but they can throw stones at debtors’ lawyers who provide information” to prosecutors and regulators, said James Bromley, a partner at Sullivan & Cromwell.

Sullivan & Cromwell has said that he should not be disqualified simply because he did some pre-bankruptcy work for FTX and never served as outside principal counsel to any FTX entity.

FTX filed for bankruptcy in November, saying it could not fully pay customers who had deposited funds on its exchange.

Serving as FTX’s lead bankruptcy counsel would likely net Sullivan & Cromwell hundreds of millions of dollars in fees, legal experts said. FTX has sought permission from the bankruptcy court to pay top Sullivan & Cromwell attorneys more than $2,000 per hour.

Bankruptcy judges generally allow businesses to choose their bankruptcy attorneys, but conflicts of interest can result in the disqualification of the attorney in rare cases.

Reporting by Dietrich Knauth in New York and Andrew Goudsward in Washington DC Editing by Alexia Garamfalvi, Kim Coghill, Matthew Lewis and Nick Zieminski

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