Judge Dorsey Denies Motion for Impartial Examiner in FTX Bankruptcy Case

The motion to assign an impartial examiner for FTX has been turned down by Judge John Dorsey from the US Bankruptcy Court in Delaware.

Judge Dorsey indicated during the February 15th hearing that he had the discretion to determine whether or not an examiner was necessary in the bankruptcy case of FTX, since some of the parties had experienced financial loss surpassing the debt threshold. He stated that appointing an examiner would be an extra financial weight placed on the debtors and creditors of FTX and therefore unnecessary.

Dorsey expressed that possessing an examiner for this situation would cost tens of millions of dollars, probably topping one hundred million, due to the magnitude of the test requested by the Trustee. He continued that based upon the particularities of the case, assigning an examiner was not in the best interests of the creditors, and that any funds spent on admin fees would mean less going to them. The judge stressed, every dollar allocated to administrative expenses is a dollar less for them.

The judge noted CEO John Ray's prior management experience in dealing with companies in bad financial condition, along with his move to assign four directors to look after FTX after the old leadership, including the former CEO Sam Bankman-Fried who has been charged in the federal court, was discharged. Judge Dorsey found that Ray was totally separated from the previous management and the companies he was appointed to take charge of.

The decision made by Dorsey followed U.S. Trustee Andrew Vara's December 1st filing to the court that an inspector was needed to be beneficial to the debtors' creditors. Vara then proposed an independent investigation to uncover whether software was being employed to hide the misuse of the FTX user funds, as well as the lack of correct record keeping at the company.

The bankruptcy proceedings have been ongoing since FTX filed for Chapter 11 in November 2022. During this time, creditors have requested documents and information from individuals in the company, including former leaders such as Bankman-Fried, through subpoenas.