The United States Trustee who is in charge of the bankruptcy case involving FTX has submitted a motion requesting that the court appoint an independent examiner.
The United States Trustee who is conducting the bankruptcy procedures for FTX has referred to the now-defunct exchange as the “fastest large business collapse in American history,” and he is asking for an independent investigation to look into the reasons for the exchange’s demise.
After reaching a market high of $32 billion earlier in the year, debtors “suffered a virtually unprecedented decline in value” over the course of eight days in the month of November, according to the Trustee Andrew Vara. This led to a severe liquidity crisis as a result of a “proverbial ‘run on the bank.'”
In the majority of bankruptcies, independent examiners are called in when it is deemed to be in the best interest of the creditors or when the amount of unsecured obligations exceeds $5 million.
This kind of examiner has been brought in to look at charges of mismanagement by Celsius as part of its ongoing chapter 11 lawsuit. This form of examiner has also been brought in to look into other high-profile bankruptcy cases, such as the one involving Lehman Brothers.
“Just like the bankruptcy cases of Lehman, Washington Mutual Bank, and New Century Financial that came before them, these cases are exactly the type of cases that require the appointment of an independent fiduciary to investigate and to report on the extraordinary collapse of the Debtors,” the Trustee said. “These cases are exactly the kind of cases that require the appointment of an independent fiduciary.”
In reference to the failure of FTX, Vara said that “the issues at stake here are just too enormous and too significant to be left to an internal probe.”
According to the motion, the appointment of an examiner, which requires the approval of the judge, would be in the interest of customers and other interested parties because they would be able to “investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” by FTX. This would be in the interest of customers and other interested parties because they would be able to “investigate the substantial and serious allegations of fraud, dishonesty, incompetence, and mismanagement
In addition, the motion indicates that an examiner might investigate the circumstances surrounding the collapse of FTX, the movement of clients’ assets away from the exchange, and the question of whether or not companies that have lost money on FTX are allowed to claim back losses.
Since taking over as CEO of FTX on November 11, John J. Ray III has been extremely critical of the company’s operations. On the first day of court, he stated that the company used “software to conceal the misuse of customer funds” and that there was “a complete absence of trustworthy financial information.” He also stated that control of the company was concentrated “in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals.”
In related news, the United States Attorney’s Office for the Southern District of New York and the United States Securities and Exchange Commission are said to have sent a number of requests to investors and firms that worked closely with FTX, asking for information on the company and its key figures. The requests were reportedly sent to investors and firms that worked closely with FTX.
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- Source: https://Blockchain.News/news/ftx-was-the-fastest-company-collapse-in-american-historysays-us-trustee