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The Bankruptcy Court for FTX is Debating Whether to Appoint an Independent Examiner

2023-02-07 14:12:05

Judge John Dorsey wants a resolution to the issue between the parties.

According to a 
Reuters article dated February 6th, a bankruptcy court has heard arguments on both sides of whether FTX should be subject to an impartial review.


In that article, it is stated that U.S. Bankruptcy Judge John Dorsey attended a hearing today and listened to arguments made by FTX and the Department of Justice (DOJ).

Prior to this, the DOJ sought the judge to appoint an impartial examiner to look into claims of fraud and other crimes at FTX and its affiliated businesses. Juliet Sarkessian, an attorney for the U.S. Trustee, stated that anytime the DOJ recommends it, an inquiry of this nature must take place in major bankruptcy cases.

The FTX lawyer, James Bromley, made an effort to disagree with the DOJ's advice. He informed the judge that the proposed probe by the DOJ should not proceed because it would be too broad and all-encompassing. According to rumors, the investigation will cost FTX money and prolong its efforts to make amends to customers after its collapse in November.

John Ray III, the new CEO of FTX, endorsed the lawyer's claims. He mentioned that the business has so far provided information in response to thousands of requests from government agencies, both inside and outside the United States. Ray claims that, allowing investors access to FTX's systems, might expose the firm to a cybersecurity risk and perhaps reduce its worth.

Ray also mentioned his role in prior Enron and Residential Capital bankruptcy proceedings. He claimed that although the expense of the court-appointed examiners in those cases was high ($90 million and $100 million, respectively), they were ultimately useless. These exams, in his words, were "extremely superficial - maybe a mile broad and an inch deep."

Sources not affiliated with Reuters claim that the judge now wants the parties to come to a "consensual agreement" and give an update on Wednesday.
In a letter released on Jan. 9, a number of U.S. senators requested the court to appoint an impartial examiner to investigate FTX's operations.

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