The United States Court of Appeals for the Third Circuit ordered the judge supervising the bankruptcy of cryptocurrency exchange FTX to appoint an independent examiner months after the initial filing.
Three judges of the Third Circuit reversed a ruling by Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware on January 19. The opinion ordered the court to designate an examiner to supervise the FTX case.
The appeals process ensued after Judge Dorsey denied a petition from Andrew Vara, the U.S. trustee in FTX’s bankruptcy case, to appoint an examiner in February 2023.
As per the judges’ assessment, granting jurisdiction to an autonomous examiner to supervise the FTX bankruptcy case would enhance transparency “within the dynamic and ever-changing cryptocurrency sector” for prospective investors.
According to the Third Circuit, an independent investigation would enable the bankruptcy court to “consider the greater public interest” when rendering decisions concerning FTX’s reorganization plan.
The decision dated January 19 stated, “An inquiry into FTX Group’s utilization of FTTs, its proprietary cryptocurrency tokens, to inflate the value of FTX and Alameda Research could further scrutinize [the crypto industry], thus alerting potential investors to undisclosed credit risks in other cryptocurrency companies.”
Fifty-eight days after Sam Bankman-Fried’s resignation and John Ray’s appointment as CEO to supervise the bankruptcy, FTX initiated Chapter 11 protection in November 2022. Bankman-Fried pleaded guilty to seven counts of felony in November 2023. March is the anticipated date of his sentencing.
On behalf of the defunct cryptocurrency exchange FTX, debtors submitted an amended reorganization plan to the bankruptcy court on December 16. The proposal entails compensating investors for lost assets per their value as of November 11, 2022.
Subsequently, the debtors disclosed valuation estimates for all assets, which comprised Bitcoin at $16,871, approximately 58% lower than its value of $40,349 as of the publication date.
