The Department of Justice has requested an independent examination into the collapse of crypto exchange giant FTX, according to a court filing from Thursday evening.
The DOJ has launched an investigation into the collapse of crypto entrepreneur Sam Bankman-Fried’s company, CoinDesk reports. The probe will request a bankruptcy court to appoint an independent examiner to determine any potential wrongdoing that may have led to the company’s filing for Chapter 7 protection on November 11.
DOJ Trustee Andrew R. Vara said in the filing: “An examiner could – and should – investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct and mismanagement by the Debtors.”
The filing described the collapse of FTX as the “fastest big corporate failure in American history.” According to Vara, there is strong reason to believe that Bankman-Fried, the former CEO, and other managers, “mismanaged” the company “or engaged in fraudulent conduct.” Bankman-Fried has been replaced as CEO by John Jay Ray III who famously oversaw the bankruptcy of Enron. Vara added that the court should approve the appointment of an independent examiner to investigate the matter further.
After FTX quickly collapsed, lawyers started to wonder if the exchange had engaged in fraudulent activity by misusing customer funds. In court filings, new FTX CEO John Jay Ray III stated that the company had hidden the misappropriation of corporate funds, including the purchase of a property in the Bahamas for employees.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said in the filing.
Bloomberg reported on Thursday that the U.S. Attorney’s Office for the Southern District of New York and attorneys from the U.S. Securities and Exchange Commission’s enforcement division have sent requests for information to crypto investors and trading firms that worked with FTX.
Read more at CoinDesk here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan