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US Government Presses for Independent Examiner in FTX Bankruptcy Case


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US Government Presses for Independent Examiner in FTX Bankruptcy Case

Following the U.S. bankruptcy court judge’s rejection of the U.S. Trustee’s plea to designate an impartial investigator for the FTX bankruptcy case, the government is now appealing this verdict. In essence, the U.S. Trustee’s appeal has been forwarded to the U.S. Third Circuit Court of Appeals, and chief judge Colm F. Connolly acknowledged that he is compelled to comply with the Trustee’s request.

U.S. Trustee Drives for Independent Examiner in FTX Bankruptcy Proceedings With Third Circuit Appeals Motion

The U.S. government, particularly the Department of Justice-appointed U.S. Trustee designated to the FTX bankruptcy case wants an independent examiner assigned to the proceedings. Last December, an attorney for the U.S. Trustee submitted a written letter to the court insisting that an impartial examiner is needed. Additionally, a small group of bipartisan U.S. senators have also stressed that an independent investigator should be assigned to the FTX case.

The U.S. senators who wrote the letter asking for an inquiry included Cynthia Lummis (R-WY), Thom Tillis (R-NC), Elizabeth Warren (D-MA), and John Hickenlooper (D-CO). However, the team managing FTX has estimated a separate examiner could cost the estate roughly $100 million in expenses. Then during the first week of February 2023, judge John Dorsey delayed his decision to appoint an examiner, and a week later he denied the U.S. Trustee’s request.

In the court filing registered on May 30, chief judge Connolly said “I have no choice but to grant the Trustee’s motion” after appellant Andrew Vara filed the motion. “No one contests that the Trustee requested an examiner here or that the debtor’s fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5 million,” the judge stated.

Judge Connolly added:

The only issue is whether, given those facts, the bankruptcy court could lawfully reject the Trustee’s request for the appointment of an examiner.

Judge Connolly further decided that the court will issue an order in accordance with this memorandum opinion. He also stated that the evaluation of the appeal’s merits will be suspended until the Third Circuit delivers a ruling. It’s been approximately 200 days since Sam Bankman-Fried’s FTX filed for Chapter 11 bankruptcy protection in November 2022.

What are your thoughts on the U.S. government’s relentless pursuit of an independent examiner in the FTX Bankruptcy Case? Share your opinions and insights in the comments section below.

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