Third Circuit Court Orders Independent Examiner in FTX Bankruptcy Case for Enhanced Transparency
Summary:
The Third Circuit Court of Appeals has overturned a prior ruling and instructed the appointment of an independent examiner in the FTX cryptocurrency exchange bankruptcy case. This decision is aimed at enhancing transparency for potential investors in the volatile cryptocurrency sector. The auditor will specifically investigate FTX Group's use of its own cryptocurrency tokens, which could bring further scrutiny to the industry. FTX sought Chapter 11 protection in November 2022 following Sam Bankman-Fried's resignation, who was later convicted of seven felonies.
Following an initial filing several months ago, the Third Circuit Court of Appeals in the United States has instructed the presiding judge in the FTX cryptocurrency exchange bankruptcy case to assign an independent auditor. In an opinion delivered on January 19th, three Third Circuit judges overturned Judge John Dorsey's decision from the U.S. Bankruptcy Court for Delaware District, necessitating the appointment of an auditor in the FTX case. Judge Dorsey declined Andrew Vara, the U.S. trustee in FTX's bankruptcy proceedings, request for an auditor in February 2023, which led to the appeal. The judges indicated that bringing in an impartial auditor to manage the FTX bankruptcy proceedings would enhance transparency for potential investors in the increasingly unpredictable cryptocurrency sector. The Third Circuit suggested that an independent inquiry would allow the bankruptcy court to take into account the "greater public interest" when making decisions about FTX's restructuring plan. The January 19 decision noted that examining FTX Group's use of its own cryptocurrency tokens, FTTs, to increase FTX and Alameda Research's values could lead to increased examination of the crypto sphere, subsequently revealing unknown credit risks to potential investors in other cryptocurrency firms. The precedent-setting opinion from the Third Circuit was delivered on January 19. FTX sought Chapter 11 safeguards in November 2022, soon after Sam Bankman-Fried stepped down and John Ray was named CEO, tasked with guiding the bankruptcy proceedings. Bankman-Fried was convicted of seven felonies in November 2023, and his sentencing date is set for March.
In related news, on December 16, creditors representing the now-defunct crypto exchange FTX submitted an updated restructuring plan to the bankruptcy court, suggesting reimbursements for investors for lost assets based on their November 11, 2022 values. The creditors also released their asset price estimates, which included Bitcoin (BTC) at $16,871 - approximately 58% lower than the current price of $40,349.
Published At
1/19/2024 8:30:00 PM
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