Appointing an independent examiner in the FTX bankruptcy proceedings “would create an increased risk of further loss through inadvertent disclosures or hacking,” Judge John Dorsey said in a hearing on Wednesday.
Dorsey, who’s overseeing the crypto exchange’s Chapter 11 case in Delaware, denied a motion from the U.S. Trustee to appoint an examiner. He cited concerns about security and cost, echoing arguments made last week by attorneys representing FTX, the creditor committee, and the joint provisional liquidators.
When a bankruptcy judge appoints an independent examiner, debtors have to pay the bill. That means FTX would have had to pay for an investigation that Dorsey estimated could have cost more than $100 million.
“It is important to keep in mind that while we talk about the cost of an investigation being borne by the debtors, we are actually talking about the cost being borne by the creditors,” Dorsey said during the hearing. “Every dollar spent in these cases on administrative expenses is $1 less to the creditors.”

FTX Bankruptcy Lawyers Say Independent Examiner Would Put Assets at Risk
The judge overseeing the FTX bankruptcy proceeding still hasn't decided whether he will appoint an independent examiner after a 4-hour hearing that included testimony from FTX CEO John Ray III. Judge John Doresey, who’s overseeing the bankruptcy proceedings, said Monday he’s asked the attorneys representing FTX, the unsecured creditor committee, U.S. Trustee and the Joint Public Liquidators of the Bahamas to discuss “a consensual resolution.” The next FTX court hearing is scheduled for Wednesday...
To bolster its argument against an examiner, the FTX legal team had newly appointed FTX CEO John Ray testify last week. Ray, himself an attorney, was named CEO when founder Sam Bankman-Fried stepped down on November 11, the same day the company filed for Chapter 11 bankruptcy protection.
Dorsey referenced Ray’s testimony during his statement Wednesday, specifically recalling that Ray said he did not find independent examiner reports helpful in past bankruptcy restructurings.
In December, Sarkeesian filed a motion to have an examiner appointed to “investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement.” A month later, the committee of unsecured creditors and FTX itself objected to the motion saying it would be too costly and duplicate much of the work Ray has already done.

Sam Bankman-Fried Insists Bankruptcy Team Is Wrong About FTX US Insolvency
Despite repeated claims from the FTX bankruptcy restructuring team that both the international and U.S. exchanges are missing millions worth of customer funds, disgraced ex-CEO Sam Bankman-Fried says they’re wrong. FTX, led by the same restructuring CEO who oversaw Enron’s bankruptcy, John Ray, made a presentation yesterday to the company’s committee of unsecured creditors. After what Ray called a “Herculean investigative effort,” the team has located only $181 million worth of FTX US funds. It...
Last week, during arguments for and against the appointment of an examiner, James Bromley, one of FTX’s lead attorneys, quipped that the U.S. Trustee was underestimating how easy it would be for an investigator to inadvertently lose FTX’s assets.
“With all due respect, the U.S. Trustee's Office views this as if we have a warehouse full of sacks of potatoes,” Bromley said during the hearing. “We do not. We have a virtual environment that is filled with code and even looking at that code puts it at risk."
Before the motion was denied, a sizable group of state securities regulators joined U.S. Trustee Juliet Sarkeesian in calling for an independent investigation into the events that preceded FTX’s collapse. By February 2, the list of states supporting her motion included Wisconsin, Vermont, Alaska, Arkansas, California, Florida, Hawaii, Idaho, Illinois, Kentucky, Maine, Maryland, New Hampshire, New Jersey, North Carolina, Oklahoma, Tennessee, and D.C.