According to the Third Circuit, an independent investigation by an examiner will let the court “consider the greater public interest” in ruling on FTX’s reorganization plan.
Months after the first filing, the United States Court of Appeals for the Third Circuit ordered the judge overseeing the bankruptcy of cryptocurrency exchange FTX to appoint an independent examiner.
In a Jan. 19 opinion, three judges with the Third Circuit reversed a ruling from Judge John Dorsey with the U.S. Bankruptcy Court for the District of Delaware, requiring the court to appoint an examiner to oversee FTX’s case. In February 2023, Judge Dorsey denied a motion from the U.S. trustee in FTX’s bankruptcy case, Andrew Vara, to appoint an examiner, leading to the appeals process.
According to the judges, allowing an independent examiner to oversee the FTX bankruptcy case would provide greater transparency to potential investors “for the evolving and volatile cryptocurrency industry.” The Third Circuit said an independent investigation would allow the bankruptcy court to “consider the greater public interest” in rulings related to FTX’s reorganization plan.
“[A]n investigation into FTX Group’s use of its own cryptocurrency tokens, FTTs, to inflate the value of FTX and Alameda Research could bring [the crypto industry] under further scrutiny, thereby alerting potential investors to undisclosed credit risks in other cryptocurrency companies,” said the Jan. 19 decision.
Precedential opinion by the Third Circuit on Jan. 19. Source: PACER
FTX filed for Chapter 11 protection in November 2022, shortly after Sam Bankman-Fried’s resignation and John Ray’s appointment as CEO to oversee the bankruptcy. In November 2023, Bankman-Fried was found guilty of seven felony charges. He is expected to be sentenced in March.
On Dec. 16, debtors representing defunct crypto exchange FTX filed an amended reorganization plan in bankruptcy court, proposing compensating investors for lost assets based on the value as of Nov. 11, 2022. The debtors later released estimates of all asset prices, including $16,871 for Bitcoin (BTC) — roughly 58% less than the $40,349 price at the time of publication.