Justice Department seeks independent probe of FTX’s meltdown

The U.S. Department of Justice is calling for an independent investigation into the collapse of cryptocurrency exchange FTX, and has asked a bankruptcy judge for the green light. 

FTX Trading, once the world’s second-largest crypto exchange, declared bankruptcy last month amid an $8 billion shortfall. In court documents filed Thursday, DOJ officials requested the bankruptcy judge approve the appointment of an independent review, citing the need for “a true neutral” probe into the collapse.

The crypto exchange’s new CEO, John Ray III, is undertaking an internal investigation into FTX’s meltdown, but the DOJ argued that a separate, independent examination is still needed. The DOJ’s Office of the U.S. Trustee said in the papers that while it doesn’t question Ray’s “qualifications, competence or good faith,” his role is as a fiduciary for the firm’s debtors and therefore the internal examination may not represent all stakeholders. 

“But the questions at stake here are simply too large and too important to be left to an internal investigation,” U.S. Trustee Andrew Vara wrote in the court document.

He added, “An examiner could — and should — investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct and mismanagement.”

FTX didn’t immediately respond to a request for comment. 

Ray, a bankruptcy expert who oversaw Enron’s liquidation, last month said he had never seen problems as severe as FTX’s. 

“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 November court documents.