FTX: U.S. trustee appeals court’s ruling denying examiner appointment

By Sarah Lizee

Olympia, Wash., March 7 – The U.S. trustee overseeing FTX Trading Ltd.’s bankruptcy case filed an appeal to the court’s ruling denying the appointment of an independent examiner, according to documents filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, shortly after FTX filed bankruptcy, Regions 3 and 9 U.S. trustee Andrew R. Vara had filed a motion seeking an examiner to investigate the company’s “extraordinary collapse.”

The motion brought objections from FTX and the official committee of unsecured creditors, which argued that appointment of an examiner would not 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, equityholders, 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.

At a hearing last month, judge John T. Dorsey said he agreed with the objectors and said appointing an examiner would likely cost more than $100 million, given the scope of the investigation that the U.S. trustee had requested. He added that creditors would be required to bear the burden of that cost.

“Given the facts and circumstances of this highly unique case, I have no doubt that the appointment of an examiner would not be in the best interest of the creditors,” Dorsey said.

“There are already multiple investigations underway by incredibly competent and independent parties.”

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

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