independent examiner

FTX Bankruptcy Judge Agrees Independent Examiner Would Mean More Risk

Appointing an independent examiner in the FTX bankruptcy proceedings “would create an increased risk of further loss through inadvertent disclosures or hacking,” Judge John Dorsery said in a hearing on Wednesday.

Dorsey, who’s overseeing the crypto exchange’s Chapter 11 case in Delaware, denied a motion from the U.S. Trustee to appoint an examiner. He cited concerns about security and cost, echoing arguments made independent-examiner-assets-risk” data-ylk=”slk:last week” class=”link “last week by attorneys representing FTX, the creditor committee, and the joint provisional liquidators.

When a bankruptcy judge appoints an independent examiner, debtors have to pay the bill. That means FTX would have had to pay for an investigation that Dorsey estimated could have cost more than $100 million.

“It is important to keep in mind that while we talk about the cost of an investigation being borne by the debtors, we are actually talking about the cost being borne by the creditors,” Dorsey said during the hearing. “Every dollar spent in these cases on administrative expenses is $1 less to the creditors.”

FTX Bankruptcy Lawyers Say Independent Examiner Would Put Assets at Risk

To bolster its argument against an examiner, the FTX legal team had newly appointed FTX CEO

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FTX Bankruptcy Lawyers Say Independent Examiner Would Put Assets at Risk

The judge overseeing the FTX bankruptcy proceeding still hasn’t decided whether he will appoint an independent examiner after a 4-hour hearing that included testimony from FTX CEO John Ray III.

Judge John Doresey, who’s overseeing the bankruptcy proceedings, said Monday he’s asked the attorneys representing FTX, the unsecured creditor committee, U.S. Trustee and the Joint Public Liquidators of the Bahamas to discuss “a consensual resolution.” The next FTX court hearing is scheduled for Wednesday, but there’s no sign yet the judge will make a ruling then.

Ray was appointed when crypto exchange FTX filed for bankruptcy and founder Sam Bankman-Fried stepped down on November 11. The company, once an influential giant in the industry, is accused of having commingled client funds with those of its sister company, Alameda Research—a crypto trading firm also founded by Bankman-Fried.

Ray said during his testimony on Monday that he and his team have been fielding daily requests from state and federal investigators. Ray also testified that he did not find examiner’s reports helpful in two prior bankruptcies he’s overseen, Enron and Residential Capital, adding that “the reports were somewhat ambivalent in the conclusionary sense.”

The FTX legal team has been arguing that the cost

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Texas, California, and New Jersey Join Call for Independent Examiner

A growing chorus of regulators wants an independent examiner appointed to review the financial statements, or lack thereof, in the FTX bankruptcy proceedings.

“Texas, among several other state and federal regulators, is currently investigating the Debtors and their related entities for violations in connection with their transaction of business in Texas and with Texas account holders,” wrote attorney Roma Desai on behalf of Texas Attorney General Ken Paxton.

The statement from the Texas attorney’s office follows similar motions from Wisconsin and Vermont regulators. The new court filing on Wednesday included letters of support from banking and securities officials in a handful of other states: Alaska; Arkansas; California; Florida; Hawaii; Idaho; Illinois; Kentucky; Maine, Maryland, New Hampshire, New Jersey, North Carolina, Oklahoma, Tennessee, and D.C..

If an examiner is appointed in the FTX case, it won’t be without some precedent.

Earlier this week the independent examiner who dug through bankrupt crypto lender Celsius released their 689-page report, concluding that problems at the company “dated back to at least 2020.”

The downfall of FTX

FTX and its related entities, including trading desk Alameda Research, filed for bankruptcy on November 11. Days later, newly appointed FTX CEO John Ray III,

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