U.S. District Judge Colm F. Connolly referred the matter of appointing an independent examiner to investigate FTX to the Third Circuit Court of Appeals.
In a Tuesday ruling, Connolly stated he had “no choice but to grant the Trustee’s motion” and hand the case over to the appellate court.
The U.S. Trustee Andrew Vara, which represents the interests of the U.S. Department of Justice (DOJ), requested an appeal after a bankruptcy court rejected a motion filed in December to appoint an examiner into the crypto exchange.
In the Feb. 15 hearing, bankruptcy judge John Dorsey ruled that the appointment of an examiner would be an unnecessary burden on FTX’s debtors.
“There’s no question that if an examiner is appointed here, the cost of the examination given the scope suggested by the Trustee at the hearing, would be in the tens of millions of dollars, and would likely exceed one hundred million dollars,” said Dorsey at the time.
Lawyers for the FTX bankruptcy estate also estimated that the cost of an appointed examiner would cost near, or even exceed, a figure of $100 million. The FTX lawyers’ estimates were made in an objection to the Trustee’s motion, which was one of three objections filed on the same day. The other objections were filed by FTX’s official committee of creditors and the Joint Provisional Liquidators, which represent FTX’s Bahamas-based entity.
Today, three objections to the US Trustee's motion for an Independent Examiner in the FTX case have been filed by:
– FTX Debtors
– Creditors Committee
– JPL (Bahamas Team)
— FTX 2.0 Coalition (@AFTXcreditor) January 25, 2023
A group of four U.S. Senators have also called for an independent examiner’s investigation into FTX, arguing that the lawyers representing the exchange and assisting the bankruptcy estate cannot be considered a disinterested party.
In a Jan. 9 letter to Judge Dorsey, Senators John Hickenlooper (D-Colo.), Thom Tillis (R-N.C.), Elizabeth Warren (D-Mass.) and Cynthia Lummis (R-Wyo.) stated that the law firm Sullivan & Cromwell had legally represented FTX for years before the exchange declared bankruptcy, and suggested that the firm may bear some responsibility for the damage wrecked on the company’s victims.
“Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings,” stated the Senators.