Bankruptcy Judge Rejects New Investigation into FTX Collapse

Bankruptcy Judge Rejects New Investigation into FTX Collapse

A bankruptcy judge on Wednesday rejected calls for a new, independent investigation into the collapse of FTX.

Reuters reports that Judge John Dorsey of the United States Bankruptcy Court for the District of Delaware denied calls for a new, independent investigation into the collapsed cryptocurrency exchange. Dorsey rejected the request by the U.S. Department of Justice’s bankruptcy watchdog, which argued that an independent examination must be launched to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement.” The DOJ further argued that the allegations are “too important to be left to an internal investigation.”

Judge Dorsey, however, rejected the request saying that such a proposed investigation would be redundant to other investigations currently carried out by FTX’s new management team and law enforcement. Dorsey also relied on the experience of FTX’s newly appointed CEO, John Ray’s experience in dealing with companies “in dire need of financial condition.”

He also explained that a new investigation would be an unnecessary spend of FTX’s limited funds:

There’s no question that if an examiner is appointed here, the cost of the examination, given the scope suggested by the Trustee at the hearing, would be in the tens of millions of dollars and would likely exceed one hundred million dollars.


Given the facts and circumstances of this highly unique case, I have no doubt that the appointment of an examiner would not be in the best interest of the creditors.

The Judge further reasoned:

Every dollar spent in these cases on administrative expenses is a dollar less to the creditors.

FTX and the panel representing its junior creditors relied on much of the same arguments of Judge Dorsey. They opined that a new, independent examiner would duplicate the work already done by law enforcement agencies, FTX itself, and its creditors. The committee further argued that the proposed investigation would deplete FTX’s limited funds.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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