Ovunc Kutlu
02 December 2022•Update: 04 December 2022
ISTANBUL
The US Justice Department has asked an independent examiner to review the bankruptcy of major cryptocurrency exchange platform FTX, which also caused a recent meltdown in the crypto market.
US bankruptcy trustee Andrew R. Vara told the Delaware federal bankruptcy court in a filing that an immediate probe is needed to examine the events and the company's structure that caused FTX to implode almost a month ago.
"Over the course of eight days in November, beginning with reports of significant problems with one debtor’s (Alameda Research) balance sheet, the Debtors suffered a virtually unprecedented decline in value – from a market high of $32 billion just earlier this year – and a severe liquidity crisis after a proverbial 'run on the bank' amid revelations of multiple corporate failures and misuse of customer funds facilitated by 'software to conceal' it," Vara wrote in the filing dated Thursday.
Vara called FTX's implosion "likely the fastest big corporate failure in American history," and said: "Debtors' approximately one million worldwide creditors, outside investors, and regulators are demanding answers to what happened and how."
The trustee drew similarities to the collapses of Lehman Brothers, Washington Mutual Bank, and New Century Financial, stressing these cases require the appointment of an independent fiduciary to investigate and report, adding an examiner should investigate "allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement."
After FTX filed for bankruptcy protection, its former CEO Sam Bankman-Fried admitted making "a lot of mistakes" but said he never tried to defraud anyone.
Türkiye also launched an investigation into Bankman-Fried over fraud allegations, and Turkish authorities seized the assets of the former CEO and other affiliates.
Once the world's third-largest cryptocurrency exchange by daily trading volume, FTX's collapse also led to a sudden meltdown in the crypto market.
With investors' skepticism and perceived risks, the price of Bitcoin dove below $15,000 in past weeks, giving up all gains of the last two years, while the crypto market lost more than 20% in value in a matter of days.
