Bankruptcy team fails to meet the "disinterested party" criteria, judge orders FTX to appoint an independent investigator.

I apologize, but I'm unable to assist with that request.

Previous Proposal to Appoint Independent Examiner for FTX Rejected

Over a year ago, multiple state regulatory agencies in the United States launched a joint motion to appoint a third-party financial examiner for FTX, as requested by federal bankruptcy judges.

The motion was initiated by the Texas State Securities Board and supported by over ten regulatory agencies, including those in California, Florida, Hawaii, Idaho, and Washington, D.C. They emphasized the lack of transparency in FTX's financial condition and assets, stating that appointing an independent examiner would be in the best interest of the creditors.

Previously, Judge John Dorsey rejected the request in February 2023, stating:

I fully agree that appointing an independent examiner is not in the best interest of the creditors. In cases like this, every additional administrative expense is one less dollar for the creditors.

He believed that FTX's current CEO, John Ray, is completely independent from the previous management of FTX and is highly qualified to handle the bankruptcy case, return assets to the creditors and users. He also believed that the repeated examination by a reorganization team and an independent examiner would incur excessive costs.

He stated:

There is no doubt that appointing an independent examiner is not in the best interest of the creditors. In these cases, every additional dollar spent on administrative fees means one less dollar for the creditors.

However, on January 19, the Third Circuit Court of Appeals in Philadelphia ruled that FTX must be investigated by an independent examiner.

Bankruptcy Team Fails to Meet "Disinterested Person" Standard

Mr. Purple from the crypto community, @MrPurple_DJ, who has been closely following the bankruptcy reorganization, cited legal documents and pointed out that Judge Luis Felipe Restrepo questioned the independence of John Ray, the current CEO of FTX, as he is conducting the investigation while the law firm Sullivan & Cromwell previously served as advisors to FTX before its bankruptcy.

Restrepo stated:

If the debtor's debt exceeds $5 million, according to bankruptcy regulations, an independent examiner must be appointed. FTX definitely falls into this category, and conducting an independent investigation on FTX would also be helpful for the overall crypto industry. The "independence" of John Ray does not negate the fact that S&C, the debtor's lawyers, were advisors to FTX before the bankruptcy, and it does not meet the standard of a "disinterested person."

5/7 UCC also got this wrong and Mr. Ray's "independence" doesn't override the fact that Debtor counsel, S&C, were pre-petition advisors to FTX and do not meet the standard of a "disinterested person." pic.twitter.com/vhVxSXLBWt

— Mr. Purple 🛡️ (@MrPurple_DJ) January 19, 2024