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

article-image

Source: Shutterstock / mundissima, modified by Blockworks

share

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.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

If DeFi can just figure out how to improve both security and compliance, nothing would stop traditional finance from entering the game

article-image

Earnings from Coinbase and Robinhood boosted stock prices, while bitcoin’s open interest hits highs not seen since 2021, 2022

article-image

Ethereum Dencun will enable Ethereum transactions to be submitted as blobs, potentially alleviating the costs of posting data on the blockchain

article-image

After a rocky start, bitcoin ETF shareholders are now well in the green

article-image

Revolut said that the standalone crypto exchange is currently “invite only”

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter