FTX Bankruptcy Referred to US Appeals Court for Independent Investigation

• FTX’s new management had expressed worry about the financial impact.
• District Judge stated that the legal criteria prompted his decision to appeal to a higher court.

An important step has been taken in the wake of the FTX collapse with the referral of a lawsuit involving the appointment of an independent investigator to the US Third Circuit Court of Appeals by a judge in Delaware.

The administration and a number of Senators first banded together to call for an independent probe into the bankruptcy of the financially troubled FTX. Moreover, FTX’s new management had expressed worry about the financial impact.

They predict that the investigation will cost the estate about $100 million in legal fees. District Judge Colm F. Connolly said on Tuesday that the legal criteria prompted his decision to appeal the FTX case to a higher court.

Thorough and Impartial Inquiry

Notably, in bankruptcy-related situations, the statute mandates that Judges send cases to higher courts at the U.S. Trustee’s request. Judge Connolly’s decision to send the matter up was also heavily influenced by the lack of factual disagreements. The argument rests on these undisputable facts, which also highlight the seriousness of the monetary predicament.

The question at hand is whether or not an objective investigation into the causes of the bankruptcy is warranted. Especially, under the present set of circumstances. The insolvency of the trading platform raises concerns about fairness and openness, which need an outside probe to find out what went wrong.

The investigator’s job is to look into what happened before the firm went down, how it ran internally, and whether or not there was any wrongdoing on the part of management. Judge Connolly emphasizes the need for a thorough and impartial inquiry into the crypto exchange issue by analyzing the legal problems surrounding an independent probe.

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