Court Orders Independent Examiner in FTX Bankruptcy Case

• Ruling of Judge John Dorsey of the U.S. Bankruptcy Court was overturned.
• The court found that prospective investors would benefit from more clarity.

An independent examiner was ordered to be appointed by the court presiding over the bankruptcy of FTX crypto exchange by the United States Court of Appeals for the Third Circuit, months after the initial filing.

Ruling of Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware was overturned by three judges of the Third Circuit on January 19. Thus, compelling the court to choose an examiner to monitor the FTX bankruptcy case. The appeals process began in February 2023. This was when Judge Dorsey dismissed Andrew Vara’s petition to appoint an examiner in FTX’s bankruptcy case.

More Clarity for Investors

Moreover, the court found that prospective investors would benefit from more clarity “for the evolving and volatile cryptocurrency industry” if an impartial examiner were to monitor the FTX bankruptcy case. Also, in its decisions concerning FTX’s reorganization plan, the bankruptcy court would be able to “consider the greater public interest” if an independent exploration were conducted, according to the Third Circuit.

The ruling mentioned:

“An investigation into FTX Group’s use of its own cryptocurrency tokens, FTTs, to inflate the value of FTX and Alameda Research could bring [the crypto industry] under further scrutiny, thereby alerting potential investors to undisclosed credit risks in other cryptocurrency companies.” 

In November 2022, not long after Sam Bankman-Fried resigned and John Ray was named CEO to manage the bankruptcy, FTX filed for Chapter 11 protection. Bankman-Fried was convicted of seven offenses in November 2023. In March, he is likely to be sentenced.

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