U.S. Trustee Andrew Vara has issued objections to several subpoenas aimed at FTX founder Sam Bankman-Fried and his inner circle, including his family and several of the collapsed crypto exchange’s former senior staff.
A subpoena is an order from a government agency, usually a court, for a person to attend a hearing or to provide evidence.
The United States Trustee Program is a component of the United States Department of Justice, which has responsibility for overseeing the administration of bankruptcy cases and private trustees.
Vara, who has been working on FTX’s complex Chapter 11 bankruptcy proceedings, said he objected to the subpoenas “to the extent they would authorize the Debtors or Committee to duplicate the investigative efforts of an examiner if one is appointed.”
The filing cited case law that says that the “bankruptcy court has an obligation to prevent unnecessary expenditures in the administration of an estate.”
The appointment of an independent examiner, who have far reaching investigative powers beyond that involved in normal civil proceedings, is an expensive measure that is generally used in the case of complex, high-profile bankruptcies such as that of oil trader Enron in the early 2000s and the Lehman Brothers in 2008.
The examiner used in the Enron fraud case in the early 2000s, R. Neal Batson, is reported to have run up $90 million in fees.
In the filing, Vara said he “respectfully requests that if the Court orders the appointment of an examiner, then the Court establish the scope of the Rule 2004 relief contemporaneously with the scope of the examiner’s investigation.”
Rule 2004 is the basic mechanism compelling people to attend bankruptcy summons in US law.
In this context, contemporaneously, meaning “simultaneously with another thing”, would likely mean that information would be shared between the two simultaneous investigations in near real-time, avoiding splurging on unnecessary legal costs and duplication of work.
An independent examiner for FTX?
Though as yet unconfirmed, the FTX bankruptcy could soon have an independent examiner working on it.
A growing chorus of regulators wants an independent examiner appointed to review the financial statements in the FTX bankruptcy proceedings.
These include Texas authorities, as well as Alaska; Arkansas; California; Florida; Hawaii; Idaho; Illinois; Kentucky; Maine, Maryland, New Hampshire, New Jersey, North Carolina, Oklahoma, Tennessee, and D.C.
