Feb 16, 2023

Judge Denies Motion Appointing Examiner for FTX Bankruptcy

The U.S. Bankruptcy Court for the District of Delaware recently heard a motion to appoint an independent examiner in the FTX bankruptcy case. After careful consideration, Judge John Dorsey ultimately denied the motion, citing the additional expense and the fact that it would be an “unnecessary burden” on FTX’s debtors and creditors.

The motion was filed by U.S. Trustee Andrew Vara on December 1, arguing that an examiner was “unquestionably in the interests of the Debtors’ creditors.” Vara suggested the examiner could investigate alleged software misuse to conceal the misuse of FTX user funds, as well as the absence of proper recordkeeping at the firm.

In response, Judge Dorsey noted that appointing an examiner would cost tens of millions of dollars, and likely exceed one hundred million dollars. The judge also cited CEO John Ray’s experience taking over other companies “in dire financial condition” and his decision to appoint four directors to oversee the silos compromising FTX following the removal of previous leadership.

Dorsey declared that Ray was “completely independent of prior management and the companies he was appointed to lead,” and that appointing an examiner would not be in the best interest of the creditors.

“Every dollar spent in these cases on administrative expenses is a dollar less to the creditors,” the judge said.

FTX filed for Chapter 11 in November 2022, and debtors in the case have since issued subpoenas to FTX insiders, including Bankman-Fried, ordering the former executives to turn over certain documents and information.

The decision to deny the motion to appoint an examiner has implications for the web3 space, as FTX is a major player in the crypto and NFT marketing industry. The company is known for their innovative NFT promotion and marketing strategies, and their Twitter NFT marketing campaigns have been particularly successful.

FTX is also an established web3 agency, providing a range of services to those looking to sell NFTs. With the denial of the motion to appoint an examiner, FTX can now continue to focus on supporting their clients and providing them with the best NFT marketing services available.

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