Judge denies FTX bankruptcy an independent examiner, citing cost
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John J. Ray III, CEO of FTX. Photo: Nathan Howard/Getty Images
A judge on Wednesday denied a previously filed motion by the U.S. trustee, requesting an appointment of a neutral, independent examiner to look into FTX and what led to the crypto exchange's collapse.
Details: It could cost creditors too much time and money, U.S. bankruptcy judge John Dorsey said during the hearing, estimating expenses at more than $100 million.
- Juliet Sarkessian, representing the U.S. trustee, had previously argued that the decision was not in the judge's hands, because it was such a major case. Sarkessian's office did not immediately respond to a request for comment.
Quick take: The judge sided with FTX, whose representatives previously made the same argument.
Why it matters: The judge is rejecting the request from a federal watchdog, the trustee's office, one supported by U.S. senators and state officials.
Context: An independent examiner would act like a private investigator of sorts, examining financial statements and interviewing those involved in the situation.
- For example, Celsius Network's bankruptcy judge agreed to grant an independent examiner provided they stay within the scope of an investigation agreed to by Celsius as well as other creditors; that report published just last month showed how insiders inflated the value of its native token.
- The Lehman Brothers bankruptcy also got one.
Flashback: FTX's new chief John Ray's recent testimony would appear to have landed with the judge.
- Ray said he and his team were qualified to conduct the examinations themselves, and that he did not find examiner's reports particularly helpful in bankruptcies he's overseen before, including Enron's.
The bottom line: FTX execs and professionals representing them in their bankruptcy proceeding are well compensated for what they bring to the table.
