US trustee appeals FTX bankruptcy judge’s ruling to deny appointment of independent examiner

Lawyers for Andrew Vara, the United States Trustee representing the interests of the Department of Justice in crypto exchange FTX’s bankruptcy proceedings, has filed an appeal against a federal judge’s denial of a motion appointing an independent examiner in the case.

In a March 6 filing in U.S. Bankruptcy Court for the District of Delaware, the legal team petitioned to have the U.S. District Court consider an appeal for a February ruling from Judge John Dorsey. The federal judge said in a Feb. 15 hearing that he would deny a motion to appoint an examiner in the FTX bankruptcy case, saying it would be an “unnecessary burden” on the firm’s debtors and creditors.

At the time, Judge Dorsey said the costs of an examiner “would likely exceed one hundred million dollars” and “not be in the best interest of the creditors”. Both Vara as well as a group of four U.S. senators called on the court to appoint an independent examiner, citing the need for transparency and suggesting potential conflicts of interest. The judge called the letter from the lawmakers an “inappropriate ex parte communication” that he would not consider in his decision.

FTX debtors argue that, in the portion of the law that states that “the court shall order the appointment of an examiner … as is appropriate”, “as is appropriate” should be interpreted also as “if it is appropriate”.

I’m on the edge of my seat.#FTXhearing

— Molly White (@molly0xFFF) February 6, 2023

Related: FTX presentation shows ‘massive shortfall’ in firm’s assets

FTX’s bankruptcy proceedings have been ongoing since the company filed for Chapter 11 protection in November 2022. The criminal case against Sam Bankman-Fried, whose trial is expected to begin in October, has recently been focused on the former CEO’s bail conditions — prosecutors have been seeking to limit or remove his ability to contact current and former FTX and Alameda employees.