FTX Crash Investigation will Cost $100 million
2023.01.26 01:09
FTX Crash Investigation will Cost $100 million
By Tiffany Smith
Budrigannews.com – Lawyers for the bankrupt crypto exchange argue that an examiner’s investigation of FTX’s collapse could cost the company upwards of $100 million without benefiting creditors or equity holders.
The arguments were part of an objection made on January 25 to a December motion from the United States Trustee, which asked the judge to appoint an independent examiner to make sure that any investigations are open and that the results are made public.
It will be interesting.
A letter requesting an independent examiner was submitted by four senators. Will they continue?
The FTX case has been taken up by several states. Will they cooperate with an Examiner?
In Enron, the SEC requested the Independent Examiner. What will they say here?
Lawyers for FTX argued that creditors would not benefit from an examiner investigation because it would duplicate investigations led by FTX CEO John J. Ray III, a committee of creditors, law enforcement agencies, and Congress, and they added the following:
“These estates can anticipate spending tens of millions of dollars to appoint an examiner with an undetermined mandate. In fact, if the past serves as a guide, the price could be close to or even exceed $100 million.”
On January 25, the creditors committee—also known as The Official Committee of Unsecured Creditors—submitted their own objection to the appointment of an independent examiner. In addition, the committee cited the prohibitive costs involved and the various parties’ ongoing investigations.
The U.S. Trustee had stated in the initial motion that the court could allow the examiner access to existing work if it was concerned about duplicate work and added:
“By allowing Mr. Ray to focus on his primary duty of stabilizing the Debtors’ businesses while allowing the examiner to conduct the investigation, an examiner may also allow for a faster and more cost-effective resolution of these cases,” the article states.
On January 25, joint provisional liquidators in the Bahamas and FTX.US also opposed the appointment, citing a section of the bankruptcy code that permits the judge to appoint an examiner “as is appropriate” and arguing that the appointment of an examiner would be “inappropriate” due to the unnecessary costs and delays it would entail.
Throughout the bankruptcy trial of FTX, the appointment of an independent examiner has been a major issue.
On December 9, a group of four U.S. senators, including Elizabeth Warren, wrote an open letter to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware. In the letter, they claimed that FTX’s legal team, Sullivan & Cromwell, had a conflict of interest in the case and that their ability to provide findings that inspire confidence was in question.
However, the judge decided on January 20 that the law firm could continue to represent FTX without encountering any significant conflicts of interest.
In a court hearing on Feb. 6, the judge will decide whether or not to accept the appointment of an independent examiner.
In high-profile bankruptcy cases like Lehman Brothers during the subprime mortgage crisis and the cryptocurrency exchange Celsius, independent examiners have been appointed by bankruptcy courts to investigate specifics of complex cases.
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