Court Considers Independent FTX Probe

Matthew Broersma,
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Sam Bankman-Fried. Image credit: FTX

US bankruptcy court to consider DOJ demand that it appoint independent examiner to probe fraud charges in FTX collapse

A US bankruptcy judge is on Monday considering whether to appoint an independent investigation into collapsed cryptocurrency exchange FTX, a move opposed by the company itself as well as the firm’s official creditors’ committee.

Meanwhile the company has stepped up its campaign to recover tens of millions of dollars of political donations made by founder and former chief executive Sam Bankman-Fried as it seeks to reimburse creditors.

The US Department of Justice’s bankruptcy regulator, the US Trustee Programme, has asked US Bankruptcy Judge John Dorsey, who is overseeing the FTX bankruptcy proceedings, to appoint an independent examiner.

The DOJ said the step is necessary to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” that are “too important to be left to an internal investigation”.

ftx, cryptocurrencyPolitical donations

The agency said such a probe is mandatory under federal law in cases where the DOJ requests one.

FTX has said such an examination would duplicate work already being carried out by the company itself, creditors and law enforcement agencies.

FTX attorney James Bromley said allowing another set of investigators to access its systems could create security risks for FTX’s own ongoing probe.

Meanwhile, on Sunday FTX said it was sending confidential letters to recipients of donations by Bankman-Fried and other FTX-linked figures, including political figures and action groups demanding the return of the funds.

Fraud charges

The letters follow an initial public announcement on 19 December that the company was looking to recoup those funds and was prepared to take legal action in bankruptcy court against those who failed to return the monies voluntarily.

FTX has now set a deadline of the end of the month for the funds to be sent back.

Bankman-Fried and other FTX executives have been accused of fraud, with Bankman-Fried pleading not guilty to the charges.

But several other former top executives, including Caroline Ellison, former chief executive of Bankman-Fried’s hedge fund Alameda Research, have pleaded guilty to fraud.