For the legal professionals keenly following the FTX Group’s Chapter 11 bankruptcy case, a noteworthy development arose last Friday. The Third Circuit reversed a Delaware judge’s denial of an external investigation request, ruling that a probe into the FTX Group’s affairs is indeed compulsory under the US bankruptcy code, and an impartial examiner must be appointed.
The FTX Group, which operates the FTX cryptocurrency exchange, had sought protection under Chapter 11 bankruptcy in November 2022, amidst a host of fraud allegations. Among the advocates for transparency was the US Trustee, an entity appointed to monitor corporate bankruptcies. The Trustee had previously appealed against US Bankruptcy Judge John Dorsey’s denial of an independent examination, a move that underpins public trust in the bankruptcy process.
With the Third Circuit’s ruling, Judge Dorsey has been instructed to appoint an independent examiner, whose investigations will proceed without any vested interests. The findings of such an investigation hold significant value as they are designed to provide a comprehensive understanding of the circumstances surrounding FTX’s collapse and are intended for public disclosure.
The case, In re FTX Trading Ltd., is likely to witness considerable attention as the investigation unfolds and provides insights into the collapse of a major player in the cryptocurrency exchange arena.
Details of this recent turn of events can be found at Bloomberg Law.