FTX: U.S. trustee’s motion for examiner appointment denied by court

By Sarah Lizee

Olympia, Wash., Feb. 15 – The motion to appoint an examiner to FTX Trading Ltd.’s bankruptcy case was rejected by the U.S. Bankruptcy Court for the District of Delaware on Wednesday.

As previously reported, Regions 3 and 9 U.S. trustee Andrew R. Vara had said the case needs 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 the Wednesday morning hearing, bankruptcy judge John T. Dorsey said he agreed with the objectors and said that 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.”

Financial adviser

Also on Wednesday, the court signed off on the official committee of unsecured creditors’ motion to appoint FTI Consulting, Inc. as financial adviser. Vara had also objected to this motion.

FTI is employed as the financial adviser to the official committee of unsecured creditors in the Chapter 11 cases of Voyager Digital Holdings, Inc.

FTX debtor Alameda Research Ltd. recently sued Voyager to recover $445.8 million in preferential transfers.

The $445.8 million sum is significant to the general unsecured creditors in both the FTX and Voyager estates, as both cases involve no material secured debt. The outcome of the suit will have a direct and substantial effect on the recoveries for general unsecured creditors of both estates.

“Because FTI represents the fiduciary body protecting general unsecured creditors of Voyager, a defendant in the preference adversary, FTI represents an interest adverse to Alameda’s estate,” Vara had said in his objection.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.