Bankman-Fried Family Subpoenas Opposed by US Government in FTX Filing

Plans for FTX and creditors to demand information on dealings would duplicate the work of the independent examiner who has yet to be appointed, the U.S. trustee said.

AccessTimeIconFeb 3, 2023 at 9:44 a.m. UTC
Updated May 9, 2023 at 4:07 a.m. UTC
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Proposals for FTX and a committee of its creditors to subpoena founder Sam Bankman-Fried, his immediate family and senior staff of the bankrupt crypto exchange have been opposed by the U.S. Trustee, a branch of the Department of Justice dealing with bankruptcy.

The plans, set to be discussed at a Wednesday hearing, would duplicate any independent examination of the exchange’s downfall, U.S. Trustee Andrew Vara said in a legal filing made Thursday. An independent examiner has yet to be appointed. The examiner issue will be discussed at a Monday hearing, with new FTX Chief Executive Officer John Ray set to give testimony.

“If the Court directs the appointment of an examiner, then his or her charge could be to investigate the same web of entities and transactions” as the proposed requests for information, Vara said. “The bankruptcy court has an obligation to prevent unnecessary expenditures in the administration of an estate.”

FTX filed for bankruptcy protection on Nov. 11, and Bankman-Fried resigned as CEO the same day, to be replaced by restructuring expert Ray. In a Jan. 25 filing, FTX's new management said Bankman-Fried, his brother Gabriel and his parents could potentially have valuable information about what happened to funds allegedly misappropriated from the company before its collapse.

Potentially key witnesses are not cooperating, FTX said, adding that co-founder Gary Wang and Caroline Ellison, head of FTX's trading arm Alameda Research, expressly declined to provide requested information.

The U.S. Trustee also opposed a bid to seek information from those who might know about a more than $300 million hack and subsequent laundering of digital assets that took place on Nov. 11-12, whose alleged identities have been redacted from court documents.

A bipartisan group of U.S. senators has been among those calling for an independent examiner into the FTX affair rather than letting the company do its own probe. In the parallel case of bankrupt crypto lender Celsius Network, examiner Shoba Pillay produced her report last Tuesday. In a Feb. 1 filing, Vara argued appointing an examiner for FTX was effectively required by law given the sums at stake.

UPDATE (Feb 3, 2023, 14:15 UTC): Amends subheading and first paragraph to clarify objection is to subpoenas from FTX and creditors.

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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.


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