FTX Investigations are Plenty, No Need for Independent Examiner, Judge Rules
The Justice Department’s bankruptcy watchdog had earlier called for the appointment of an independent examiner, saying it would carry more weight than an internal one
Source: Shutterstock / mundissima, modified by Blockworks
An FTX bankruptcy judge has denied a motion to appoint an independent examiner.
Judge John Dorsey said it would be unnecessary in comparison to other ongoing inquiries by law enforcement and FTX’s new management.
Considering the scope of the inspection, the cost of an examiner would run into the “tens of millions of dollars” and would likely exceed $100 million, he noted in the Wednesday ruling in the District of Delaware.
“Given the facts and circumstances of this highly unique case, I have no doubt that the appointment of an examiner would not be in the best interest of the creditors,” Dorsey added, according to an audio recording of the hearing.
He also suggested that new FTX CEO John J. Ray’s experience with restructuring other troubled companies like Enron and the departure of previous executives — Sam Bankman-Fried, Caroline Ellison and Gary Wang — indicates any internal investigations will be free from influence.
“Every dollar spent in these cases on administrative expenses is a dollar less to the creditors,” Dorsey said.
The Justice Department’s bankruptcy watchdog, the US Trustee, called for an independent investigation into FTX in early January, saying the crypto exchange’s customers need an impartial party to look into allegations of fraud and misconduct.
An independent investigation would hold more water than an FTX-led one conducted by Ray, and would allow the new CEO more time to look after the exchange’s operations, according to the office.
FTX lawyers then argued that appointing an independent examiner is not appropriate in the interest of creditors, equity holders or other interests of the estate.
“The evidence is uncontradicted that Mr. Ray and the board are both qualified and independent,” the lawyers said.
“The appointment of an examiner would be duplicative of the efforts of Mr. Ray, the board, the debtors their advisors, and the committee and their advisors,” and this effort would come at an “enormous cost,” they added.
Dorsey said he agreed with the objectors, and thus denied the motion.
Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.
