US District Judge sends matter of FTX independent examiner to appellate court – Crypto News

A United States District Judge has referred a motion requesting the appointment of an independent examiner for bankruptcy crypto exchange FTX to an appellate court.

In documents filed in the US District Court for the District of Delaware on May 30, Judge Colm Connolly said the US Trustee in FTX’s case, Andrew Vara, requested an appeal following bankruptcy court rejecting a motion in February to appoint an examiner overseeing the failed crypto exchange. According to court filings, bankruptcy laws allow the appointment of an independent examiner when certain conditions are met — as in the case of FTX — but do not require it.

“Whether [law] mandates the appointment of an examiner upon the US Trustee’s request when the debtor’s debts specified in the statute exceed $5 million is, of course, a question of law,” said Connolly. “Because the Bankruptcy Court rejected the Trustee’s request for the appointment of an examiner based in part on its answer to that question […] Certification of the Order for an appeal to the Third Circuit is therefore required.”

Lawyers for FTX debtors have argued that the appointment of an examiner in the bankruptcy case would cost roughly $100 million and “provide no benefit” for creditors. However, Vara — representing the interests of the US Justice Department — and several US lawmakers have called on the court to do so to prevent potential conflicts of interest.

Bankruptcy Judge John Dorsey denied Vara’s motion in February, leading to the US Trustee appealing in March. The matter will now likely go to the US Court of Appeals for the Third Circuit.

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FTX filed for Chapter 11 bankruptcy protection in November 2022, while the criminal case against former CEO Sam Bankman-Fried continues to move forward. Bankman-Fried has been largely confined to his parents’ California home since his extradition from the Bahamas to the US in December, with his trial expected to begin in October.

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