FTX CEO John Ray III said the exchange did not keep its financial records properly before its bankruptcy. After some submissions, the US trustee responsible for federal bankruptcy oversight made a decision. Indeed, he asked the court to appoint an independent examiner to check the finances of the bankrupt exchange. But, during a hearing on Monday, FTX’s attorneys disagreed with the request.
Judge John Dorsey grants time for a “consensual resolution”
John Dorsey, a Delaware bankruptcy judge, has not yet ruled on the appointment of an independent reviewer. He took into account statements from FTX lawyers who think it would be a bad idea. According to these, having the financials of the exchange reviewed by an independent specialist would be too expensive. Yet debtors happen to currently need $8 billion in unrestricted cash. The exchange itself would only have $1.2 billion in unrestricted cash.
James Bromley, an attorney for FTX, explained: “It’s just going to be a duplication of effort and a huge amount of expense.“. He emphasized:We don’t have enough money to pay off all our creditors“. At the same time, Judge John Dorsey himself has indicated that the appointment of an examiner would be extremely costly.
The judge clarified that this would cost FTX hundreds of millions of dollars. To counter the problem, he proposed that a fixed budget be granted to the examiner. He also decided to give time to the lawyers for the various parties to find a “consensual resolution“. This could avoid a judge’s decision.
The attorneys involved are those for the debtors of FTX, the US trustee, the creditors’ committee and the liquidators. It must be said that the hearing on Monday lasted at least five hours, with the pleadings and the cross-examinations. Judge Dorsey waited until the end of the lawyers’ pleadings to invite them to discuss in private. They have until Wednesday to inform the judge of their resolution, during a hearing.
This is not the first time that there has been talk of appointing an independent reviewer in a case related to a crypto business. Such an appointment had been made as part of Celsius’ bankruptcy proceedings. The appointed examiner incidentally provided a shocking report on the crypto lender last week.
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