Yahoo Finance DOJ seeks independent investigation into FTX collapse
Yahoo Finance crypto reporter David Hollerith details the latest news surrounding federal investigations into crypto exchange FTX's collapse, as lawmakers invite founder Sam Bankman-Fried to Congress to testify.
Video transcript
SEANA SMITH: All right, well, the Justice Department is requesting an independent investigation into the collapse of FTX. Yahoo Finance's David Hollerith is here with the details. And David, what can you tell us about this and the significance of it?
DAVID HOLLERITH: Yeah, well, so as far as significance goes, this was filed yesterday by the US Trustee, a component of the Justice Department. And the same thing happened months ago in the bankruptcy case for Celsius Network. At a high level, this would be something like a forensic analysis that would be used to determine the root causes that ultimately led to FTX's collapse. It would also involve tracing where funds or assets have gone. And that could be-- implicate how creditors are paid out and in what order.
And the investors-- the examiner's investigation, which is what is being asked for, an independent investigation, would likely be appointed by a law firm, to some extent. Now, the motion hasn't been approved yet by the judge, but it is likely to do so, given the stakes that have already been raised in this bankruptcy and the nature of complications.
The US Trustee, again, in the court document, filing this motion, citing also, too, that there is substantial basis to believe that management of FTX conducted fraudulent activities and otherwise did not keep the books correctly. So the demands for this seem fairly normal. And we're likely to see a ruling on this soon, although it might take a hearing to decide it.
DAVE BRIGGS: Well, speaking of the hearing, that's what we expect in the House Financial Services Committee. What's the expectation there?
DAVID HOLLERITH: Yeah, that's right. So the last time Sam Bankman-Fried testified before the House Financial Services Committee, Chairman Maxine Waters blew the young crypto mogul a kiss afterwards. Bankman-Fried has been invited back again, obviously. And we're not really expecting that this time. It's likely to be different.
Waters has invited the FTX founder to testify on a panel December 13, which will be about the exchange's collapse. She and the representative, Brad Sherman, have also said that he could attend virtually, if preferred. Now Bankman-Fried has not responded yet to the requests.
As for what can be expected from the hearing, outside of more details on how FTX lost an estimated $8 billion of customer funds, we're likely also to hopefully hear something about the investments that Bankman-Fried had said came in just after the company had filed for bankruptcy, and hopefully more clarity on to the risk management practices FTX had been conducting.
DAVE BRIGGS: All right, we'll see if Mr. SBF gets on that tie again and comes to Capitol Hill. Don't hold your breath. David Hollerith, thank you, sir. Enjoy the weekend.
