FTX bankruptcy judge dismisses call for new probe into crypto exchange meltdown

By Dietrich Knauth

(Reuters) – A U.S. bankruptcy judge on Wednesday dismissed calls for a new, independent probe into the collapse of crypto exchange FTX, saying the proposed probe is superfluous to other investigations being conducted by FTX’s new management and law enforcement agencies may be.

Judge John Dorsey in Wilmington, Delaware, denied a request from the US Department of Justice Bankruptcy Supervisor, who argued that an independent examiner needed to be appointed to investigate allegations of “fraud, dishonesty, incompetence, wrongdoing and mismanagement” that were “too important.” “are to be left to an internal investigation.”

FTX and the committee representing its subordinated creditors denied that request, stating that the proposed auditor would merely repeat the work already being done by FTX, its creditors and law enforcement. The proposed investigation would also drain millions of dollars from FTX’s limited funds, the company argued.

FTX, once one of the world’s top crypto exchanges, rocked the sector in November by filing for bankruptcy, leaving an estimated 9 million customers and investors with billions of dollars in losses.

FTX founder Sam Bankman-Fried, who has been accused of stealing billions of dollars from FTX clients to pay off debts at his hedge fund Alameda Research, has pleaded not guilty to the fraud charges.

He is due to be tried in October. Several former top executives, including Alameda Research CEO Caroline Ellison, have pleaded guilty to fraud.

(Reporting by Dietrich Knauth, editing by Deepa Babington)