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FTX points to cost, cyber-risk in opposing independent bankruptcy investigation

  • February 15, 2023

By Dietrich Knauth

(Reuters) -FTX’s lawyers on Monday strongly urged a U.S. bankruptcy judge in Delaware not to greenlight a court-supervised investigation into its collapse, saying it would waste time and money and could pose a security risk.

FTX attorney James Bromley at Monday’s hearing told U.S. Bankruptcy Judge John Dorsey, who is overseeing the crypto exchange’s Chapter 11 case, that the proposed review the U.S. Department of Justice’s bankruptcy watchdog is seeking is so vague that it is essentially asking for an examiner to look at “everything, everywhere, all at once.”

The U.S. Trustee has asked Dorsey, to appoint an independent examiner to investigate allegations of fraud, misconduct, and mismanagement that are “too important to be left to an internal investigation.”

Juliet Sarkessian, an attorney for the U.S. Trustee, argued such an investigation is mandatory under federal law in large bankruptcy cases where DOJ or a creditor requests one.

Dorsey, who said he believed an examiner was not required, but should be appointed if “appropriate,” did not rule on Monday. He asked FTX, its creditors and the U.S. Trustee to try to reach an agreement on the scope of a potential examiner review.

FTX said an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies, adding cost and delay to its effort to repay customers in bankruptcy.

FTX’s new CEO, John Ray, said on Monday that FTX has already answered 156 requests for information from federal prosecutors in Manhattan, producing 70,000 documents, as well as hundreds of requests from other U.S. regulators and prosecutors, members of Congress and foreign governments.

Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, told the court that examiners in those cases cost $90 million and $100 million, respectively, but

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Wells Fargo to pay $300 million to settle car insurance suit

  • February 13, 2023

Wells Fargo & Co. has agreed to pay $300 million to settle a lawsuit claiming it improperly charged customers for unneeded auto-collision protection insurance — and hid the practice from investors.

The deal was announced Tuesday by the law firm that sued the bank after a New York Times investigation revealed that about 274,000 customers were put into delinquency and almost 25,000 vehicles were wrongfully repossessed.

“While we disagree with the allegations in this case, we are pleased to have resolved this legacy issue,” a bank spokesperson said in a statement.

Wells Fargo stopped charging customers for the insurance but didn’t tell investors, according to a statement issued by Robbins Geller Rudman & Dowd LLP. The law firm filed a securities-fraud class action alleging that the bank’s stock traded at artificially inflated prices.

Wells Fargo disclosed in a regulatory filing that it had been aware of the problem since 2016, the year before the wellsfargo-unwanted-auto-insurance.html” class=”omnitrack inline-paragraph-link” data-omnilocation=”articlebody” data-omnilink=”editorial-link”2017 New York Times story, according to the statement.

Attorneys for the investors are now seeing court approval of the settlement.

“When companies conceal widespread abusive or unfair business practices that harm their customers, investors often get injured, as well,” Scott H. Saham, a lawyer representing the class, said in the statement.

The case is Purple Mountain Trust v. Wells Fargo & Company, 3:18-cv-03948, U.S. District court for the Northern District of California (San Francisco).

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U.S. bankruptcy judge weighs demand for independent investigation into collapse of FTX

  • February 11, 2023

Former FTX chief executive Sam Bankman-Fried leaves Manhattan federal court, on Jan. 3.DAVID DEE DELGADO/Reuters

A U.S. bankruptcy judge is considering at a Monday court hearing in Delaware whether to greenlight a court-supervised investigation into the collapse of FTX, a course of action that the crypto exchange opposes as redundant and wasteful.

The U.S. Department of Justice’s bankruptcy watchdog has urged U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11, to appoint an independent examiner to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” that are “too important to be left to an internal investigation.”

Juliet Sarkessian, an attorney for the U.S. Trustee, said such an investigation is mandatory under federal law in all large bankruptcy cases where DOJ requests one.

FTX has said an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies.

FTX attorney James Bromley told Dorsey that an investigation is not appropriate, and allowing new investigators to access its systems could jeopardize the cybersecurity of FTX’s ongoing investigation.

FTX’s new CEO, John Ray, said that FTX has already answered 156 requests for information from federal prosecutors in Manhattan, producing 70,000 documents, as well as 151 requests from the U.S. Commodity Futures Trading Commission and hundreds of requests from other U.S. regulators and prosecutors, members of Congress and foreign governments.

FTX has acknowledged that its past conduct raised questions about fraud and mismanagement, but has said another layer of review would only add cost and delay to the company’s effort to repay customers in bankruptcy.

Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, told the court that examiners in those two cases cost $90 million and $100 million, respectively, but were not useful.

“They were very shallow –

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