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DOJ asks court to investigate allegations of fraud in FTX case



On Thursday, December 1, the U.S. Department of Justice’s Office of Administrators filed a motion with the Delaware Bankruptcy Court, requesting the appointment of an independent examiner to investigate allegations of fraud and dishonesty in the FTX stock market collapse case.

The motion compares the crisis that led to the FTX bankruptcy to other high-profile bankruptcy cases of the past. “Like the Lehman, Washington Mutual Bank and New Century Financial bankruptcy cases, these are exactly the kind of cases that require the appointment of an independent trustee to investigate and report on the extraordinary collapse of debtors,” the motion reads. the request from the Department of Justice.

The application cites the testimony of CEO John Ray, appointed by the Delaware bankruptcy court, who sharply criticized the management of Sam Bank-Fried as head of the exchange FTX and Alameda Research, as reported by CryptoNews.

FTX: collapse in record time.

From these statements by Ray, the motion points out that over the course of eight days in November, FTX “suffered an unprecedented drop in value from its peak market value of $32 billion at the beginning of the year.”

According to Ray’s testimony, a severe liquidity crisis occurred, following revelations about multiple corporate failures and misuse of client funds.which were facilitated by “software to hide them,” the application reads.

The result is what is probably the fastest corporate failure in U.S. history, as seen in these “free-falling” bankruptcy cases. About a million debtors’ creditors worldwide, outside investors and regulators are demanding answers about what happened and how it happened.

U.S. Department of Justice Motion.

The application argues in detail that because of the broad implications of the FTX case, an internal investigation conducted by the court-appointed CEO would not be as efficientnor would it have the scope of an investigation by an independent examiner.

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“An external examiner could-and should-investigate substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” by FTX and Alameda Research management, the document says. The request stresses, “The stakes are simply too high and too important to be left to an internal investigation.

The Bankruptcy Court for the District of Delaware will hold. a hearing on December 16 next on the FTX case, which will be broadcast live10 a.m. ET.


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