Column: Fight among founders of beleaguered crypto firm Roche Freedman will go to jury

By Alison Frankel

Nov 28 (Reuters) - In February 2021, the start-up crypto law firm then known as Roche Cyrulnik Freedman ousted name partner Jason Cyrulnik, a former Boies Schiller Flexner partner who had been the firm’s highest-paid attorney in 2020.

There are two wildly divergent accounts of the events that led to Cyrulnik's departure.

According to Cyrulnik, the law firm’s other partners, after inducing him to join the new firm, engaged in an “egregious scheme” to strip him of his rights to about $60 million in crypto tokens that a Roche Freedman client, Ava Labs, had distributed to the firm. In Cyrulnik’s telling, he was the unwitting victim of greedy young lawyers who took advantage of his established client roster to launch their firm, then stabbed him in the back when the Ava tokens skyrocketed in value.

Roche Freedman, as the law firm was renamed after Cyrulnik’s departure, tells a different story. According to the firm, Cyrulnik was a toxic presence with a bad habit of demeaning and berating other lawyers, to the point that several senior associates threatened to quit rather than continue working with him. By February 2021, the law firm contends, three partners had also told firm leaders they would leave the firm if Cyrulnik remained. The firm asserts that the partnership ultimately opted to part ways with Cyrulnik to avert a mass exodus.

Cyrulnik, who is now a name partner at Cyrulnik Fattaruso, did not respond to my email query. He has vehemently denied his former partners’ most incendiary accusations, asserting that no associates complained to him about his conduct before he was kicked out of the firm. That fact alone, according to Cyrulnik’s lawyers from Kasowitz Benson Torres, is good reason to doubt the credibility of Roche Freedman’s after-the-fact allegations of toxic conduct.

The law firm, meanwhile, has cited at least two emails in which partners called out Cyrulnik for screaming at them. “I am happy to leave the firm if that is preferred,” wrote a Roche Freedman partner who, like Cyrulnik, had been a Boies Schiller partner before moving over to the crypto startup, in an email to Cyrulnik. “But I will not stay and take your outbursts again.”

It will now be up to a jury of New Yorkers to decide who is telling the truth. U.S. District Judge John Koeltl of Manhattan, who is presiding over a slew of claims and counterclaims brought by Cyrulnik and his former partners, ruled on Friday that neither side is entitled to summary judgment. Unless there’s a surprise settlement, the case of the warring crypto partners is headed to trial.

I should note that Roche Freedman itself no longer exists under that name. As you probably recall, onetime name partner Kyle Roche resigned from the firm in October 2022, after the leak of secretly-recorded videos that appeared to depict Roche saying (among other embarrassing things) that he filed class actions against competitors of his cornerstone client, Ava Labs, in order to boost Ava’s prospects. (Roche, who did not respond to my queries, has contested the authenticity of the tapes and has argued that he was set up by an Ava competitor.)

After the clandestine tapes leaked and Roche resigned, the reconstituted firm, now known as Freedman Normand Friedland, exited a handful of crypto cases, including two from which it was disqualified. The fallout seems recently to have abated, though.

The Cyrulnik case, meanwhile, has been grinding on in federal court in Manhattan since early 2021. Summary judgment briefing in the case focused on whether Roche Cyrulnik Freedman had a valid partnership agreement. Roche Freedman contended that all of Cyrulnik’s claims against the firm and individual partners stemmed from the alleged breach of a memorandum of understanding that he and five other partners, including Roche and Devin “Vel” Freedman, signed when Cyrulnik joined the firm in December 2019.

But according to the law firm, the memo was merely a placeholder agreement, not a definitive partnership contract. The memo, Roche Freedman argued, did not bind the law firm to any obligations to Cyrulnik because those obligations continued to be negotiated. Similarly, according to the firm, Cyrulnik cannot contest his removal under the memo’s standard for what constitutes just cause.

Without a formal partnership agreement, Roche Freedman said, the only question is whether the other partners were justified in kicking Cyrulnik out – and, in the firm’s view, the record in the case proves indisputably that they were.

Cyrulnik, by contrast, argued that the memo was an enforceable agreement, and that Roche Freedman indisputably breached its terms when the other partners booted him.

In Friday's decision, Koeltl agreed with Cyrulnik that the memorandum of understanding “unambiguously creates a binding partnership agreement.” He also agreed that Cyrulnik did not withdraw from the law firm, thereby surrendering his equity stake. “Under any reasonable interpretation of that term, the involuntary removal of a partner is not a withdrawal,” the judge said.

But Koeltl refused to decide whether Roche Freedman and the individual partner defendants had just cause to remove Cyrulnik from the partnership – and what the consequences of a justifiable ouster should be under the binding memo of understanding. Those questions, he said, must be hashed out by a jury.

The judge did dismiss several of Cyrulnik’s claims, mostly because they duplicated his breach-of-contract allegations.

Cyrulnik, as I mentioned, didn't respond to my email about the ruling. Freedman referred my query to a spokesperson, who sent an email statement from Roche Freedman counsel Matthew Leto of the Leto Law Firm.

Leto said that his clients look forward to making their case to a jury.

“While the court found we must show the jury a real reason existed for Cyrulnik’s termination, we are confident that no jury will ignore the reams of evidence [Roche Freedman has] collected,” Leto said. The decision, he added, "confirms that my clients were not required to continue working with an abusive partner."

Read more:

Secret recordings of ex-partner continue to haunt law firm Freedman Normand

Crypto law firm Roche Freedman parts ways with founder after video leak

Law firm gets green light to sue ex-partner in crypto battle

(Reporting By Alison Frankel)

((alison.frankel@thomsonreuters.com; 646-223-6491 (o) 917-848-7493 (c);))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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