The Department of Justice (DOJ) is considering reevaluating its decision to assign a prominent New York law firm, Sullivan & Cromwell, to handle a monitorship for Binance due to concerns over potential conflicts of interest. The monitorship was mandated as part of a plea agreement resolving anti-money laundering and sanctions violations charges against Binance, which acknowledged culpability for infringing upon US regulations. Initially, Sullivan & Cromwell was designated as Binance’s independent monitor, but concerns were raised due to the firm’s prior work for FTX, a competitor of Binance. The DOJ is now reviewing alternative candidates for the monitorship role, while FinCEN remains intent on appointing Sullivan & Cromwell.
Sullivan & Cromwell has faced scrutiny for its representation of FTX prior to its collapse and throughout its bankruptcy proceedings, with the firm submitting invoices exceeding $170 million for its services. In February, FTX investors filed a class-action lawsuit alleging the firm’s complicity in an $8 billion fraud, citing the firm’s advisory role providing unique insight into FTX’s organizational structure. A US bankruptcy judge authorized an investigation into potential conflicts of interest held by Sullivan & Cromwell regarding its work with FTX.
Former federal prosecutor Sharon Cohen Levin, a partner at Sullivan & Cromwell, was slated to lead the monitorship team for Binance. However, DOJ officials have expressed concerns over criticism directed towards the law firm due to its work for FTX, prompting a review of alternative candidates for the monitorship role. The monitorship, which would be implemented for three to five years, is a critical element of the agreement between Binance, the DOJ, and FinCEN to address the money laundering and sanctions violations charges against the exchange.
Despite the concerns raised by the DOJ, FinCEN appears to be committed to appointing Sullivan & Cromwell as Binance’s independent monitor. However, the final decision regarding the monitorship role has not yet been made, as the DOJ continues to evaluate alternative candidates. Sullivan & Cromwell, the DOJ, and FinCEN have not provided any comments or responses regarding the potential reconsideration of the law firm’s appointment for the monitorship role.
The allegations of potential conflicts of interest and complicity in fraud against Sullivan & Cromwell have further complicated the situation surrounding the monitorship for Binance. The law firm’s prior work for FTX has raised concerns about its impartiality and ability to effectively oversee Binance’s compliance with anti-money laundering and sanctions regulations. The ongoing investigation into Sullivan & Cromwell’s relationship with FTX and the class-action lawsuit filed by FTX investors add to the uncertainty surrounding the selection of an independent monitor for Binance.
The outcome of the DOJ’s review and the final decision on the monitorship role will have significant implications for Binance’s compliance with US regulations and its efforts to address the money laundering and sanctions violations charges. The selection of an independent monitor is a crucial step in ensuring Binance’s adherence to the terms of the plea agreement and the implementation of necessary measures to prevent future violations. The controversy surrounding Sullivan & Cromwell’s potential appointment underscores the complex legal and ethical considerations involved in overseeing cryptocurrency exchanges and holding them accountable for regulatory compliance.
