FTX, Voyager celeb endorsement class actions spark fight over law firm subpoenas
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(Reuters) - A pair of Florida class actions attempting to pin liability on celebrities who endorsed the now-collapsed FTX and Voyager crypto exchanges has led to a showdown between FTX outside counsel at Sullivan & Cromwell and plaintiffs' lawyers from Boies Schiller Flexner and The Moskowitz Law Firm.
The plaintiffs' firms say they’re entitled to troves of documents and deposition testimony from Sullivan & Cromwell because the firm has represented FTX since 2021 and advised the now-bankrupt platform on a potential (but unconsummated) acquisition of Voyager assets.
Sullivan & Cromwell says that rationale is poppycock.
That’s my word, not Sullivan & Cromwell's, but it captures the tone of the firm's opposition to the Boies Schiller and Moskowitz demands. (The firm’s exact phrases: “improper and harassing” and “textbook fishing expedition.”)
On Wednesday, Sullivan & Cromwell moved to quash a subpoena from the plaintiffs' firms in a Florida state court class action accusing NFL quarterback Tom Brady, CNBC star Kevin O’Leary and former Boston Red Sox slugger David Ortiz of violating Florida securities laws by promoting FTX yield-bearing accounts as a safe way to invest in cryptocurrencies.
Wednesday’s motion, filed in New York State Supreme Court, follows a parallel challenge Sullivan & Cromwell filed last week in Manhattan federal court, seeking to squelch a subpoena in a Moskowitz and Boies Schiller class action in Miami federal court. The Miami class action alleges that Dallas Mavericks owner Mark Cuban improperly hyped Voyager’s yield-bearing crypto accounts. Sullivan & Cromwell’s brief in support of quashing the Voyager subpoena was docketed on Tuesday.
The subpoenas issued to Sullivan & Cromwell in both the FTX and Voyager cases are focused on the question of whether FTX and Voyager yield-bearing accounts were securities (and therefore subject to state and federal securities laws). Boies Schiller and Moskowitz demanded to see any documents in which Sullivan & Cromwell lawyers addressed whether these accounts were required to be registered as securities, including “legal memorandums, white papers, electronic correspondence” and other communications with the crypto platforms, their celebrity endorsers, investors or state and federal regulators. The subpoena in each case called for Sullivan & Cromwell to turn over documents related to both Voyager and FTX.
The fatal flaw in plaintiffs’ demands, according to Sullivan & Cromwell, is not just that the subpoenas demand privileged information, including communications with third parties who have no role whatsoever in the class actions, but also that Moskowitz and Boies Schiller haven’t shown any reason to believe that Sullivan & Cromwell even has information about FTX or Voyager yield-bearing accounts.
Sullivan & Cromwell argued that it has never represented Voyager at all. It did not represent Mark Cuban or any of the FTX “brand ambassadors” about their crypto endorsements. And although Sullivan & Cromwell has been counsel to FTX entities since 2021, the firm said, its voluminous public disclosures in FTX’s Chapter 11 bankruptcy “do not identify any representations of FTX concerning whether the cryptocurrency accounts or tokens referenced in the subpoena constitute securities.”
Given those facts, Sullivan & Cromwell argued, it would be “unduly burdensome and harassing” to force the firm to comb through its records merely to confirm that it doesn’t have responsive documents.
In an email exchange with Sullivan & Cromwell that was attached as an exhibit to the quash motions, Moskowitz appeared to be unswayed by the law firm's arguments that it had no relevant information from its FTX representation and no information at all related to Voyager. Moskowitz justified the Voyager subpoena in a Jan. 17 email by citing “companies that Sullivan & Cromwell represented, where Mark Cuban and/or Voyager were directly involved (like in Polygon),” an apparent reference to blockchain company Polygon Labs, whose general counsel is a former Sullivan & Cromwell associate.
Sullivan & Cromwell characterized Moskowitz’s tone in the week-long email exchange as “belligerent.” You can read the emails yourself, but I’d posit that Moskowitz was more insistent than belligerent. When Sullivan & Cromwell said there was no way a firm lawyer would appear for a deposition on the date specified in the subpoena, for instance, Moskowitz replied, “We will be at your offices in NY at 9am, ready to set up the video deposition to start at 10 am.” Sullivan & Cromwell described that as a threat, but threat or not, the deposition apparently did not take place.
The firm's motion to quash the state court subpoena in the FTX class action also argued that Moskowitz and Boies Schiller have framed the securities question as a matter of pure law by moving for summary judgment on their assertion that the yield-bearing accounts were unregistered securities. The plaintiffs firms, according to Sullivan & Cromwell, “cannot in good faith assert that fact discovery from a nonparty is necessary on that issue while simultaneously insisting that the ... court can decide the issue on the existing record as a matter of law.”
Sullivan & Cromwell partners Sharon Nelles and Stephen Ehrenberg did not respond to my email about the quash motions. Adam Moskowitz and David Boies also did not respond to my query, so I don’t know if the plaintiffs' lawyers have issued subpoenas to other law firms, in addition to Sullivan & Cromwell, that advised FTX and Voyager.
Mark Cuban’s lawyers at Brown Rudnick declined to comment on the Sullivan & Cromwell subpoena fight. They previously told me they were confident the class action against Cuban would be dismissed, in part because Voyager account holders did not rely on Cuban’s endorsement. Brady counsel Andrew Clubok of Latham & Watkins was on a trial and unavailable for comment.
In my unrequited query to Moskowitz and Boies, I asked if they intended also to subpoena Sullivan & Cromwell in their federal court class action against Brady and a host of other celebrity “ambassadors” for FTX. I guess we’ll see what the New York state and federal judges overseeing Sullivan & Cromwell’s quash motions have to say first.
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