Bankruptcy Team Fails to Meet “No Interested Parties” Criteria, Judge Orders FTX to Appoint Independent Investigator

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FTX Independent Investigator Previously Rejected
Bankruptcy Team Does Not Meet “Uninterested Party” Criteria
FTX Independent Investigator Previously Rejected
Over a year ago, regulatory agencies in multiple US states initiated a joint motion to appoint a third-party FTX financial examiner by a federal bankruptcy judge.
The motion was initiated by the Texas Securities Commission and supported by over ten regulatory agencies, including those in California, Florida, Hawaii, Idaho, and Washington, D.C. They emphasized that appointing an independent examiner for FTX debtors is in the best interest of the creditors due to the lack of transparency in FTX’s financial condition and assets.
Previously, Judge John Dorsey rejected the request in February 2023, stating:
“I completely agree that appointing an independent examiner is not in the best interest of the creditors. In cases like this, every additional dollar of administrative expenses means one less dollar for the creditors.
He believes that FTX’s current CEO, John Ray, is completely independent from the previous management of FTX and is highly qualified to handle the bankruptcy case and return assets to creditors and users. He also believes that the repeated scrutiny of the reorganization team and independent investigator would result in excessive costs.
He stated:
“Without a doubt, appointing an independent examiner is not in the best interest of the creditors. In these cases, every additional dollar of administrative expenses means one less dollar for the creditors.”
However, the Philadelphia Third Circuit Court of Appeals ruled on January 19th that FTX must undergo an investigation by an independent examiner.
Bankruptcy Team Does Not Meet “Uninterested Party” Criteria
Mr. Purple (@MrPurple_DJ), a member of the cryptocurrency community following the bankruptcy reorganization, quoted legal documents stating that Judge Luis Felipe Restrepo believes that the ongoing investigation by FTX’s CEO, John Ray, raises concerns about its independence, as the law firm Sullivan & Cromwell previously served as FTX’s advisor before the bankruptcy.
Restrepo stated:
“If the debtor’s debt exceeds $5 million, as is the case with FTX, a court-appointed independent examiner is required under bankruptcy regulations, and conducting an independent investigation into FTX would also benefit the overall cryptocurrency industry. John Ray’s ‘independence’ does not refute the fact that S&C served as FTX’s advisor before the bankruptcy and does not meet the criteria for an ‘uninterested party.'”
FTX
John Ray
Independent Investigator
Bankruptcy Reorganization
Further Reading
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