U.S. Court Asked to Reverse Decision to Not Appoint Independent Examiner in FTX Bankruptcy

A Delaware bankruptcy court judge had previously denied a motion to appoint a neutral examiner to avoid a lengthy and costly investigation that would slow the progress of the bankruptcy proceedings.

AccessTimeIconMay 18, 2023 at 8:09 a.m. UTC
Drive the Crypto Policy Conversation Forward
October 24, 2023 • Convene • Washington D.C.Where the industry establishes the digital economy’s legal, regulatory and compliance best practices for the future.Register Now

A Delaware bankruptcy court must reverse a previous order denying the appointment of an independent examiner in the FTX bankruptcy case, the U.S. Trustee, a branch of the Department of Justice (DOJ), said in a court filing from Wednesday.

In the filing, the Trustee says the bankruptcy court "committed legal error" in its February decision to oppose the appointment request in a case where the criteria for requiring such an examiner are met – including the condition that the bankrupt estate has over $5 million in "qualifying liabilities."

In February, Judge John Dorsey of the Bankruptcy Court of Delaware sided with the FTX estate, which argued an investigation would cost around $100 million and "slow the progress of these cases."

Although parties to the FTX case have complained about the "alleged" costs associated with appointing an examiner, for "both legal and practical purposes, any costs associated with appointing an examiner do not justify departure from the statutory requirement to appoint an examiner where, as here, the statutory criteria are met," DOJ Trustee Andrew R. Vara said in the filing.

The FTX crypto enterprise filed for bankruptcy in November, shocking the crypto industry, with its founder Sam Bankman-Fried facing criminal charges in the U.S.

Edited by Parikshit Mishra.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.