Judge Postpones FTX Examiner Ruling For Consensual Resolution

The Block reported that a judge in a Delaware federal bankruptcy court has postponed a decision on appointing an examiner in the FTX bankruptcy case to allow the lawyers involved to seek a mutually agreed solution. The US Trustee, responsible for overseeing the bankruptcy, had requested the appointment of an independent examiner to investigate FTX’s finances. 

The FTX debtors opposed the appointment, stating it would be too costly and raise cybersecurity issues. Lawyers for the US Trustee, FTX debtors, creditors committee, and liquidators will update the judge on their progress in a hearing on Wednesday. During the hearing, the judge acknowledged the cost of appointing an examiner, which could run into hundreds of millions of dollars, but also discussed the possibility of setting a budget for the examiner.

The lawyers engaged in arguments and cross-examination for about five hours before the judge invited them to seek a consensual resolution. The creditors committee and joint provisional liquidators in the Bahamas also opposed the examiner motion.

During Monday’s hearing, FTX CEO John Ray III testified as a witness and provided insight into the extensive documentation and data the company has gone through since filing for bankruptcy protection in November.

Ray stated that the previous leadership of the company had not kept trustworthy financial records and the company was in a state of disarray. He was paid $690,000 (excluding expenses) for his work from November 11th, when he took over as CEO, to December 31st. The new management has since collected millions of documents and responded to hundreds of government requests, totaling over 10 terabytes of data or 27 million documents.

FTX is cooperating with criminal and regulatory investigations, including 156 requests from prosecutors in the Southern District of New York, and has provided 70,000 documents and given four presentations based on their evidence analysis.