• FTX was brought before a bankruptcy court in Delaware to decide whether or not to open an independent investigation.
• The US Trustee argued in favor of an investigation on allegations of fraud, misconduct, and mismanagement.
• FTX argued that an external investigation is a waste of money and poses a risk to the cybersecurity of the exchange.
FTX Bankruptcy Hearing
FTX was brought before a bankruptcy court in Delaware to decide whether or not to open an independent investigation on the firm’s collapse.
US Trustee Calls for Investigation
The US Trustee, through their lawyer, Juliet Sarkessian, said an independent investigation is mandatory under federal law in all significant bankruptcy cases where the DOJ requests one. The trustee told the judge that the goal of the FTX debtors is recovering as much as possible and that they need to be aligned with the goals of the neutral examiner tasked with investigating malpractice.
FTX Argues Against Examiner
FTX attorney James Bromley argued that an examiner would merely duplicate work already done by law enforcement agencies and FTX creditors. He added that allowing new investigators to access FTX systems puts the cybersecurity of their ongoing investigation at risk.
Judge Dorsey Asks Parties To Reach Agreement
Judge Dorsey did not rule on the matter but asked FTX and the US Trustee to try to reach an agreement on the scope for a potential examiner review. He said an examiner should be appointed if appropriate.
The outcome of this hearing will impact how FTX moves forward with its debts and customers’ claims as well as any potential investigations into malpractice by FTX management during its collapse.