FTX, committee object to U.S. trustee’s motion to appoint examiner

By Sarah Lizee

Olympia, Wash., Jan. 25 – FTX Trading Ltd. and the official committee of unsecured creditors objected to a motion to appoint an examiner filed by the U.S. trustee overseeing the case, according to documents filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Regions 3 and 9 U.S. trustee Andrew R. Vara said the case needs an examiner to investigate the company’s “extraordinary collapse.”

FTX argued that appointment of an examiner wouldn’t be appropriate in these cases.

“The pieces of the FTX corporate puzzle are day by day being put back together under the supervision of new and independent management with the participation of the statutorily mandated committee,” FTX said in its objection.

“The appointment of an examiner would be duplicative of the efforts of Mr. Ray, the board, the debtors, their advisors, and the committee and their advisers.”

The debtor said this duplication of effort would come at an enormous cost and provide no benefit to the creditors, equity holders, or other interests of the debtors’ estates.

FTX also said it is difficult to imagine an examiner candidate whose qualifications exceed those of John R. Ray III, who replaced Sam Bankman-Fried as chief executive officer in November.

The committee said that an examiner’s investigation will delay progress and force the estates to incur significant incremental legal fees for a report with no evidentiary value.

Even after an examiner completes its investigation, the committee said it will ultimately need to independently determine the merits of any claims and causes of action that may be asserted because the examiner can’t bring those claims.

The committee also said that while previous mega bankruptcy cases, such as Enron, Lehman, Residential Capital and Caesars Entertainment, can guide the court’s understanding of the costs of an examiner – potentially as much as $50 million to $100 million – these Chapter 11 cases are readily distinguishable from those and other mega cases inasmuch as an examiner’s report here is “quite unlikely” to expedite the conclusion of these cases.

FTX has headquarters in the Bahamas. The company filed Chapter 11 bankruptcy on Nov. 11 under case number 22-11068.

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