DeepSummary
In this episode, Michael Lewis interviews Jonathan Lipson, a bankruptcy expert at Temple University, about the FTX bankruptcy proceedings. Lipson argues that the bankruptcy process has been mishandled, highlighting potential conflicts of interest between the various parties involved, including the law firm Sullivan & Cromwell, the Department of Justice, and the prosecutors in the criminal case against Sam Bankman-Fried.
Lipson explains that examiners, who are meant to provide an independent investigation into the company's affairs, are often opposed by debtors and creditors due to the costs involved and potential interference with negotiations. He suggests that Sullivan & Cromwell may have avoided an examiner to conceal their mistakes before the bankruptcy and maintain good relations with regulators.
Lipson also alleges that Sullivan & Cromwell provided significant support to the prosecution against Bankman-Fried, potentially creating a conflict of interest within the Department of Justice. He argues that the bankruptcy proceedings may be aimed at liquidating FTX and sealing records, rather than reorganizing the company as a going concern, which could reveal more information about Sullivan & Cromwell's actions.
Key Episodes Takeaways
- Jonathan Lipson, a bankruptcy expert, argues that the FTX bankruptcy proceedings have been mishandled, with potential conflicts of interest involving the law firm Sullivan & Cromwell, the Department of Justice, and the prosecution against Sam Bankman-Fried.
- Lipson suggests that Sullivan & Cromwell may have avoided appointing an independent examiner to conceal their mistakes in representing FTX before the bankruptcy and maintain good relations with regulators.
- He alleges that Sullivan & Cromwell provided significant support to the prosecution against Bankman-Fried, potentially creating a conflict of interest within the Department of Justice.
- Lipson argues that the bankruptcy proceedings may be aimed at liquidating FTX and sealing records, rather than reorganizing the company as a going concern, which could reveal more information about Sullivan & Cromwell's actions.
- He recommends reforms to the bankruptcy system, including more frequent use of independent examiners and greater scrutiny of pre-bankruptcy relationships between companies and their legal representatives to identify potential conflicts of interest.
- Lipson also suggests that the US Trustee, meant to act as a watchdog in bankruptcy proceedings, is often disregarded by judges and not given proper deference.
- Overall, Lipson's allegations and recommendations highlight potential flaws in the current bankruptcy system and the need for greater transparency and accountability to protect the interests of creditors and the public.
- The FTX bankruptcy proceedings serve as a case study for examining these issues and potentially spurring reforms to address conflicts of interest and ensure the integrity of the bankruptcy process.
Top Episodes Quotes
- “We think, in a broader class of cases, we absolutely think that judges should take much more seriously questions about whether the lawyers for the company, who have so much control and power in these cases, really had any pre bankruptcy relationships here or in any case like this.“ by Jonathan Lipson
- “So I think they correctly view themselves as being really important intermediaries between large, important regulated companies and the folks who regulate those companies. And if you've been making a significant mistake with those regulators for a while with a prominent company, and you wake up one morning and realize that maybe you panic, maybe that's a problem for you.“ by Jonathan Lipson
- “The truth is, the US trustee is often the only person coming into the bankruptcy court and saying like, hey, guys, we think there's a problem here. Can you please slow this down? And I think sometimes the judges feel like the US trustees are just kind of meddlesome bureaucrats and they don't maybe get quite the deference that they deserve here.“ by Jonathan Lipson
Entities
Person
Company
Book
Product
Organization
Publication
Episode Information
Against the Rules with Michael Lewis: The Trial of Sam Bankman-Fried
Pushkin Industries
3/27/24
While Sam Bankman-Fried has been on trial, the cryptocurrency exchange he founded, FTX, has been going through bankruptcy proceedings. Jonathan Lipson, a professor at Temple Law School, tells Michael Lewis that he believes the proceedings have highlighted problems with the US bankruptcy system.
Jonathan Lipson’s research paper “FTX’d: Conflicting Public and Private Interests in Chapter 11” is forthcoming in the Stanford Law Review. You can read a draft here.
You can listen to our previous interview about the FTX bankruptcy with Jonathan’s co-author, David Skeel, here.
See omnystudio.com/listener for privacy information.