The U.S. Trustee from the Department of Justice who is in charge of FTX’s bankruptcy case has asked the court to choose an independent examiner.
The US Trustee in charge of FTX’s bankruptcy has called the now-defunct exchange the “fastest big corporate failure in American history” and is calling for an independent investigation into how it went bankrupt.
In a motion filed on Dec. 1, U.S. Trustee Andrew Vara said that debtors “suffered a virtually unprecedented decline in value” in November, going from a market high of $32 billion earlier in the year to a liquidity crisis after a “so-called “run on the bank.”
“As a result, these “free fall” bankruptcy cases happened, which is probably the fastest big business failure in U.S. history.
Vara has asked for FTX to be looked at by a third party, saying that it is “especially important” because FTX’s collapse could have wider effects on the cryptocurrency industry.
Independent examiners are usually brought into bankruptcy cases when it is in the best interest of creditors or when unsecured debts are over $5 million.
This kind of examiner has been called in for other high-profile bankruptcy cases, like Lehman Brothers, and more recently to look into claims of bad management by Celsius as part of its ongoing chapter 11 case.
The Trustee said, “Like the bankruptcy cases of Lehman, Washington Mutual Bank, and New Century Financial before them, these are the kind of cases that need an independent fiduciary to look into and report on the extraordinary collapse of the Debtors.”
Vara also said that “the questions at stake here are simply too big and too important to be left to an internal investigation” when talking about the collapse of FTX.
The motion says that appointing an examiner, which needs the judge’s approval, would be in the best interest of customers and other interested parties because the examiner would be able to “investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” by FTX.
The motion also suggests that an examiner could look into why FTX failed, why customers’ funds were moved off the exchange, and whether or not entities that lost money on FTX can get their money back.