FTX Bankruptcy Lawyers Say Independent Examiner Would Put Assets at Risk
- February 8, 2023
The judge overseeing the FTX bankruptcy proceeding still hasn’t decided whether he will appoint an independent examiner after a 4-hour hearing that included testimony from FTX CEO John Ray III.
Judge John Doresey, who’s overseeing the bankruptcy proceedings, said Monday he’s asked the attorneys representing FTX, the unsecured creditor committee, U.S. Trustee and the Joint Public Liquidators of the Bahamas to discuss “a consensual resolution.” The next FTX court hearing is scheduled for Wednesday, but there’s no sign yet the judge will make a ruling then.
Ray was appointed when crypto exchange FTX filed for bankruptcy and founder Sam Bankman-Fried stepped down on November 11. The company, once an influential giant in the industry, is accused of having commingled client funds with those of its sister company, Alameda Research—a crypto trading firm also founded by Bankman-Fried.
Ray said during his testimony on Monday that he and his team have been fielding daily requests from state and federal investigators. Ray also testified that he did not find examiner’s reports helpful in two prior bankruptcies he’s overseen, Enron and Residential Capital, adding that “the reports were somewhat ambivalent in the conclusionary sense.”
The FTX legal team has been arguing that the cost of an independent examiner would be significant and duplicate a lot of the work that Ray’s team has been doing since November.
Between the day that he was appointed and the end of last year, Ray said that he has done $690,000 worth of work for the company.
But the U.S. Trustee assigned to the case, Juliet Sarkessian, argued that 18 states have voiced their support for an examiner to be appointed. The latest has been Texas, which filed its joinder last week along with 15 other states.
James Bromley, an FTX attorney, argued that “to allow anyone else