A United States district judge has remanded a motion seeking the appointment of an independent examiner for failing cryptocurrency exchange FTX to an appellate court.
In documents filed in the US District Court for the District of Delaware on May 30, Judge Colm Connolly said that the US administrator in the FTX case, Andrew Vara, requested an appeal after the bankruptcy court rejected a motion in February to appoint an examiner to oversee the bankrupt exchange. According to court records, bankruptcy laws allow the appointment of an independent examiner when certain conditions are met — as in the FTX case — but do not require it.
“Whether the law requires the appointment of an examiner at the request of the US Receiver when the debtor’s debts specified in the statute exceed $5 million is, of course, a matter of law,” Connolly said. “Because the Bankruptcy Court denied the Trustee’s request for the appointment of an examiner based in part on his response to that question […] Certification of the Order for an appeal to the Third Circuit is therefore necessary.”
Lawyers for FTX debtors have argued that the appointment of an examiner in the bankruptcy case would cost about $100 million and would “do no benefit” to creditors. However, Vara – who represents the interests of the US Department of Justice – and several US lawmakers have asked the court to do so to avoid potential conflicts of interest.
Bankruptcy judge John Dorsey denied Vara’s petition in February, prompting the US Trustee to appeal in March. The matter will likely now reach the US Court of Appeals for the Third Circuit.
FTX filed for Chapter 11 bankruptcy protection in November 2022, while the criminal case against the former CEO Sam Bankman-Fried keep moving forward. Bankman-Fried has been largely confined to his parents’ California home since his extradition from the Bahamas to the US in December, and his trial is expected to begin in October.
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