A bankruptcy judge has heard both sides of the debate over whether FTX should face independent review. February 6th Report from Reuters.
U.S. Bankruptcy Judge John Dorsey listened to arguments from FTX and the Department of Justice (DOJ) at today’s hearing, according to the report.
DOJ previously asked a judge to appoint an independent reviewer to investigate allegations of fraud and other misconduct within FTX and its affiliates. U.S. Trustee Attorney Juliet Sarkesian said large bankruptcy cases require this type of investigation whenever the DOJ suggests it should be done.
FTX attorney James Bromley attempted to refute the DOJ’s recommendation. He told the judge that the Department of Justice’s proposed investigation should not be conducted because of the vague and comprehensive nature of such an investigation would entail.
Perhaps the investigation will impose costs on FTX and prolong the company’s attempts to compensate users in the aftermath of the November collapse.
FTX’s successor, John Ray III, supported the lawyer’s claims. You said you created a document. Ray also said that allowing investors to access his FTX’s systems could create cybersecurity risks and erode value within the company.
Ray also noted his involvement in past bankruptcies of Enron and Residential Capital. He said the court-appointed examiners in those cases were expensive, costing him $90 million and he $100 million respectively, but ultimately to no avail. He called those tests “very shallow–something like a mile wide and an inch deep.”
Sources outside Reuters said the judge now hopes the parties involved can reach a “consensual resolution” and provide an update on Wednesday.
Earlier, in a letter published Jan. 9, various U.S. senators asked the court to appoint an independent examiner to investigate FTX’s activities.
