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The United States court overseeing FTX's bankruptcy case heard arguments for and against the appointment of an independent reviewer to investigate the billions of dollars crypto stock market crash starting in November 2022.
Recently, US trustee Andrew Vara has offered to appoint an external reviewer to examine how the FTX operations led to the collapse of the platform. Vara claimed that a reviewer would prove invaluable in uncovering the factors that led to bankruptcy and exposing any wrongdoing committed by employees or senior managers like founder Sam Bankman-fried.
Vara also pleaded against issuing subpoenas for the family of bankman-fried and so-called "intimate circle", calling the displacement a waste of resources managed by the estate.
A reviewer may and should investigate significant and serious allegations of fraud, dishonesty, incompetence, misconduct, and poor management of accounts receivable, the circumstances of the debtor's breakdown, the apparent conversation of the property of the exchange clients, and if there are claims and causes of action of color to compensate for losses.
Vara's proposal added that the legislation mandates a reviewer in cases of this magnitude, a statement supported by a host of state regulators at the bankruptcy hearing on Monday. The trustee noted that the cause of the degrees is precedent setting with respect to the bankruptcy proceedings of crypto companies.
In the Celsius case, the examiner’s report concluded that the company operated like a Ponzi scheme under former CEO Alex Mashinsky.
Supporters of appointing an examiner stressed that victims and creditors of the crypto exchange may not get a full assessment of what went wrong at FTX and who was responsible for the collapse without an external probe.
The argument for an external reviewer also stresses that such a report could facilitate the recovery of assets and help identify third party entities that may have contributed, with or without knowledge, FTX's implosion of billions of dollars.
Ray noted that the report was of little value despite the cost of a fortune, a sentiment that the American Trustee's lawyer has repeatedly opposed. Opposses Examiner Appointment, Cites Enron
John Ray III who took over from SBFas CEO testified during Monday’s hearing to oppose the appointment of an external examiner. Ray stood up, citing the famous Enron bankruptcy case, which the veteran supervised as well.
Ray said a review report cost more than $90 million and $100 million for Enron. Ray noted that the report was of little use despite the cost of a fortune, a feeling that the US fiduciary lawyer has repeatedly opposed.
John Ray III, President and Chief Executive Officer of FTX. Indeed, Ray affirmed that FTX’s crypto assets are too “complex and too fragile” to expose to an independent examiner, re-echoing statements from previous hearings about the shoddy accounting and corporate practices in Bankman-Fried’s crippled crypto empire.
Trustee Attorney Pushes For Independent Examiner
U.S. Trustee attorney Juliet Sarkessian presented statements to prove that the examiner’s report in the Enron case was useful at the time, but the Judge ultimately overruled the argument as the records could not be authenticated.
The judge ultimately overturned the argument as the records could not be authenticated. At the time of the news, the bankruptcy judge had not yet made a decision as to whether or not to appoint an independent reviewer.
Sarkessian insisted that the court appoint the reviewer today and decide the scope of the reviewer's access at a future hearing. Sarkessian was also of the opinion that a reviewer would be less expensive than Ray's CEO's bankruptcy team. Sarkessian also believed that a reviewer would cost less than the bankruptcy team of CEO Ray.
