Court Orders Independent Investigation into FTX Collapse

Published: Jan 19, 2024
Written By:
Vignesh Karunanidhi
Milk Road Writer

A federal appeals court ruled Friday that cryptocurrency exchange FTX must face an independent investigation by a court-appointed examiner, overturning an earlier bankruptcy court decision.

The ruling from the Third Circuit Court of Appeals in Philadelphia remands the matter back to the Delaware bankruptcy court overseeing FTX’s Chapter 11 case.

Key details:

  • The Appeals Court orders an independent probe into the FTX collapse.
  • Overrules a bankruptcy judge who denied appointing an examiner.
  • Cites need to study industry practices exposed by the crypto blowup.

Read more: 50% Or Lower Odds Of SEC Approving Spot Ethereum ETF By May: JPMorgan

Judges say investigation by current FTX CEO is insufficient

Judges found the current investigation led by FTX chief executive John Ray III insufficient without external scrutiny from an examiner with no ties to the failed firm.

Authored by Circuit Judge Luis Felipe Restrepo, the precedential decision underscores the need for transparency into crypto business practices highlighted by FTX’s epic collapse.

An independent FTX investigation could bring certain opaque activities, like using native exchange tokens to amplify trading volumes, under closer examination. “Thereby alerting potential investors to undisclosed credit risks in other cryptocurrency companies,” Restrepo wrote.

Read more: Bitcoin ETFs Surpass Silver ETFs In Assets Under Management

The ruling also cites worries over the potential involvement of fraudulent insiders remaining at the exchange despite last year’s meltdown. Circuit judges worry that the current counsel for FTX Group previously represented the firm before its bankruptcy as well. The opinion orders the appointment of an outside, disinterested examiner empowered to fully investigate FTX without obstacles.

Vignesh Karunanidhi

Vignesh has been a seasoned professional in the crypto space since 2017. He has been writing for over 6 years and specializes in writing and editing various types of crypto content, including news articles, long-form pieces, and blog posts, all focused on sharing the beauty of blockchain and crypto.

Vignesh Karunanidhi
Milk Road Writer
Vignesh has been a seasoned professional in the crypto space since 2017. He has been writing for over 6 years and specializes in writing and editing various types of crypto content, including news articles, long-form pieces, and blog posts, all focused on sharing the beauty of blockchain and crypto.