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Justice John Dorsey refused to give a final decision on the appointment of an independent reviewer in the FTX bankruptcy case. The United States government argued that the law required the judge to require such a review, while ftx argued that an investigation would be an expensive duplication.
Having expressed concern that the work of the reviewer could be costly and delay the approval of a restructuring plan under Chapter 11, Mr. Dorsey expressed hope that the matter could be settled between the two parties before a new hearing on Wednesday.
"How can I confirm a plan if I have appointed an examiner to let me know if any insiders have done anything wrong?" Dorsey asked a question. “It really doesn't make any sense to be a mandatory obligation by the court that is not subject to discretion.”
Juliet Sarkessian, representing the U.S. Trustee, a branch of the Department of Justice (DOJ) concerned with bankruptcy matters, had argued the decision was effectively out of the judge’s hands in such a major case.
"That's what Congress decided was necessary in these circumstances," said Sarkessian, citing the relevant article in the Bankruptcy Code. "The FTX situation is a garbage truck fire.”
"There is no reason to believe that the cost of the examiner in the course of an investigation will be more than the professionals of the debtors conducting an investigation," Sarkswarn added, FTX attorneys' fees of up to $2,000/hour.
A reviewer could examine allegations of abuse of client funds and the security of digital assets in the stock market, and if anyone was still employed in the FTX, Sarkessian said.
Attorneys for ftx and its creditors argued that the report would be a waste of estate resources and that the persons alleged to have committed wrongdoing had already left the company.
“we do not have enough money to pay back all of our creditors and the u.s. trustee … says that we should spend tens or even hundreds of millions of dollars” on a report, James Bromley from the law firm of FTX, sullivan & cromwell. There is "no evidence that any of these professionals or reviewers to be appointed would not be more independent" than the company's own personnel and the experts hired, added Bromley. The new headmaster of FTX, jeans ray III, had already cited $90-100 million as the typical cost of a reviewer's report, on the basis of its experience with companies like enron.
In January, a bipartisan group of U.S. senators wrote a letter to the judge to support having the independent examiner envisaged under the Bankruptcy Code to probe allegations of fraud or incompetence at the failed crypto exchange.
Last week, Four months after he was appointed to the bench in New York, the examiner shoba pillay has released its 500-page report on the collapse of the crypto loan firm's Celsius network, saying that the company had misled clients and used client funds for operating expenses.
