The ongoing investigation over the collapsed crypto exchange, FTX, seems expensive. As the firm’s lawyers, joint provisional liquidators, the Bahamas and a committee of creditors opposed the appointment of an independent examiner. They said the examiner could cost $100 Million and provide no benefits to creditors or equity.
These arguments were part of a January 25th, 2023 objection to a motion from the United States Trustee in December. That says for the judge to appoint an independent examiner to ensure any investigations are transparent and their findings made public.
The FTX lawyers argued that creditors would not benefit from an examiner investigation. The investigation was led by FTX’s CEO John J. Ray III, a committee of creditors, law enforcement agencies, and congress, who said “The appointment of an examiner, with a mandate to be determined, can be expected to cost these estates in the tens of millions of dollars. Indeed, if history is a guide, the cost could near or exceed $100 million.”
In addition, the Official Committee of Unsecured Creditors also submitted their objection to the appointment of an independent examiner. They cited the prohibitive costs involved and the investigations of various parties that are already underway.
According to the original motion, the U.S. Trustee added that “An examiner may also allow for a faster and more cost-effective resolution of these cases by allowing Mr. Ray to focus on his primary duty of stabilizing the Debtors’ businesses while allowing the examiner to conduct the investigation.”
Furthermore, the Joint provisional liquidators in the Bahamas and FTX opposed the appointment. They pointed to a section of the bankruptcy code that allows the judge to appoint an examiner “as is appropriate,” and argued that unnecessary costs and delays which would accompany the appointment of an examiner render it “inappropriate.”
It must be noted that the appointment of an independent examiner was a crucial topic during the bankruptcy trial.
In an open letter to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, a group of four U.S. senators including Elizabeth Warren claimed that FTX’s counsel Sullivan & Cromwell had a conflict of interest in the case. They also cast doubt on their ability to give findings that inspire confidence.
Meanwhile, the judge ruled on January 20th, 2023 that there were no potential conflicts of interest sufficient to stop the law firm from continuing to act as FTX’s counsel. Now the judge will decide about the acceptance of the appointment of an independent examiner in a court hearing on February 6th, 2023.
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