Judge Will Not Delay FTX Bankruptcy Proceedings

Reading Time: 2 minutes
  • The judge in FTX’s bankruptcy case has refused to delay proceedings to investigate its collapse
  • Attorneys sought the delay, emphasizing the need for extensive discovery and therefore a pause in bankruptcy proceedings
  • Judge John Dorsey denied the motion, noting that the complexity issue cuts both ways

The judge overseeing the bankruptcy of defunct exchange FTX has said he will not delay the process to allow for a comprehensive evaluation of what led to the exchange’s collapse. Attorneys representing FTX had requested a delay of one to two months to allow for a comprehensive discovery process to understand the circumstances leading to FTX’s insolvency, but Judge John Dorsey denied the motion, arguing that the case’s complexity meant it shouldn’t be delayed. With former CEO Sam Bankman-Fried now found guilty following his trial last month, attention should now focus on getting creditors their money back.

FTX Wants to Investigate Insolvency

Lawrence Gebhardt, representing FTX, emphasized the need to investigate the period between November 2021 and October 2022 when, according to FTX’s own attorneys, the exchange was deemed solvent. The objective of the investigation would have been to determine the events that transpired during that time frame, leading to FTX’s insolvency.

Gebhardt argued that the investigation would necessitate a pause on bankruptcy proceedings given that the discovery would be complex and expensive and would involve deposing key individuals located around the world; these would include former attorney Dan Friedberg in Washington, former counsel Can Sun in the Bahamas, and former CEO Sam Bankman-Fried, who is currently incarcerated.

Complexity Argument Cuts Both Ways

In response, Jonathan Carter, a partner at Sullivan and Cromwell which is overseeing the bankruptcy, argued that the defense had sufficient time for fact discovery, and they were notified of available documents on September 21. Gebhardt claimed not to have received the notification, which drew unfortunate comparisons with the recent testimony by Sam Bankman-Fried in court.

After considering the matter, Judge John Dorsey denied the motion, emphasizing that “If the discovery is as complex as it is said to be, it needs to be started now, not delayed”. He also noted that the conviction and imminent sentencing of Bankman-Fried adds another layer to the complex legal challenges faced by FTX in its bankruptcy proceedings.