FTX Examiner Appointment Referred to Court of Appeals by District Judge

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The appointment of an independent investigator into the collapse of crypto exchange FTX was on Tuesday referred to the U.S. Third Circuit Court of Appeals by a Delaware District Judge.

The government has joined a bipartisan grouping of Senators to call for an independent inquiry into the fall of Sam Bankman-Fried’s empire, despite warnings from FTX’s new management the probe could cost the estate around $100 million in legal costs.

In a Tuesday ruling, District Judge Colm F. Connolly argued the matter was out of his hands, as the law compels him to refer the case upwards if the U.S. Trustee, a branch of the Department of Justice (DOJ) concerned with bankruptcy, asks for it, and if there’s no dispute over facts.

“No one contests that the Trustee requested an examiner here or that the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5 million,” Connolly’s ruling said, adding that all that remains is a legal question – whether the bankruptcy code compels an independent probe.

In March, John Dorsey, a judge from a bankruptcy court, declined to appoint an examiner into the case, saying it could represent a costly delay to the wind-up of the network of around 100 companies.

FTX filed for bankruptcy in November. Bankman-Fried, FTX’s former chief executive officer, is battling DOJ charges including wire fraud, while filings by his successor John J. Ray III have hinted at a reboot of the exchange’s activity.

In January, independent examiner Shoba Pillay found thatCelsius had used new customer fundsto pay for withdrawals, after she was asked in September to investigate whether the bankruptcy crypto lender had operated as a Ponzi scheme.