LONDON (Bywire News) - A U.S. Bankruptcy Judge is set to decide whether a court-supervised investigation into the collapse of crypto exchange FTX should be allowed to continue.
The U.S. Department of Justice has argued in favor of appointing an independent examiner to investigate allegations of "fraud, dishonesty, incompetence, misconduct, and mismanagement" that have been leveled against the company. FTX has argued that the investigation is unnecessary and would only add cost and delay to its efforts to repay customers in bankruptcy.
FTX, once one of the world's top crypto exchanges, filed for bankruptcy in November, leaving an estimated 9 million customers and investors facing losses in the billions of dollars. Its founder, Sam Bankman-Fried, has pleaded not guilty to fraud charges and is due to stand trial in October. Several former top executives, including Alameda Research CEO Caroline Ellison, have pleaded guilty to fraud.
The creditors committee has sided with FTX, saying the proposed investigation is redundant. State securities regulators in Texas, Vermont and Wisconsin have supported the Justice Department's bid, saying a neutral report would benefit creditors and customers.
The bankruptcy judge's decision will be watched closely by the crypto industry, which has been rocked by the FTX collapse. If the investigation is allowed to proceed, it could shed light on the inner workings of the exchange and how it was able to conceal its financial woes from customers and investors. It could also help to prevent similar disasters from occurring in the future.
The crypto industry is abuzz with speculation over what the outcome of the bankruptcy judge's decision will be. Whatever the result, it is sure to have a lasting impact on the crypto sector and the way it is regulated in the future.
(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi, Michael O'Sullivan and Daniel Wallis)