Appeals court reverses judge's ruling, orders appointment of independent examiner in FTX bankruptcy

Source: Associated Press

Appeals court reverses judge’s ruling, orders appointment of independent examiner in FTX bankruptcy

BY RANDALL CHASE
Updated 5:33 PM EST, January 22, 2024

DOVER, Del. (AP) — A federal appeals court has ordered the appointment of an independent examiner in the bankruptcy case of FTX amid concerns about widespread fraud preceding the collapse of the multibillion-dollar cryptocurrency exchange.

A three-judge panel in Philadelphia issued the ruling Friday in an appeal filed by the U.S. bankruptcy trustee, who serves as a government watchdog in Chapter 11 reorganizations. Lawyers for the trustee had argued that FTX’s financial affairs and business operations, including allegations of unprecedented fraud leading to its collapse, should be reviewed by a disinterested person, not left to an internal investigation.

U.S. Bankruptcy Judge John Dorsey denied the trustee’s request last February. He agreed with FTX and its official committee of unsecured creditors that an examiner’s work would be too costly and would duplicate investigations already under way by FTX’s new leadership, the creditors committee and several federal agencies. Dorsey also expressed confidence in John Ray III, who was appointed by FTX co-founder Sam Bankman-Fried as the company’s new CEO on the same day the company sought bankruptcy protection.

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The appeals court reversed Dorsey’s ruling, agreeing with the trustee that the bankruptcy code mandates the appointment of an examiner.

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Read more: https://apnews.com/article/ftx-bankmanfried-cryptocurrency-bankruptcy-71a1ec1170c080836507a0cee1ff854a