A U.S. Justice Department official is calling for an independent investigation into the sudden collapse of the FTX crypto exchange, describing it as “the fastest big corporate failure in American history” akin to the Lehman Brothers bankruptcy of 2008, according to a Dec. 1 court filing.

Already looking into the fall of Sam Bankman-Fried’s Bahamas-based crypto enterprise, the DOJ now wants a bankruptcy court to appoint an independent examiner to investigate potential fraud that may have led to the collapse.

Independent examiners are more common in large chapter 11 cases when borrowers or corporate insiders are accused of misconduct, Wall Street Journal reported.

Falling from a market high of $32 billion earlier this year, FTX declared bankruptcy on Nov. 11. A so-called hack depleted more than $600 million from user wallets later the same day.

There is a substantial basis to believe that former CEO Bankman-Fried – who has since been replaced by John Jay Ray III – and other managers “mismanaged” the company “or engaged in fraudulent conduct,” DOJ Trustee Andrew R. Vara said in the filing.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,” Vara said.

The U.S. Securities and Exchange Commission and U.S. Attorney’s Office for the Southern District of New York are also asking crypto investors and trading firms that worked with FTX for information about SBF and Caroline Ellison, the former head of his Alameda Research investment arm, Bloomberg reported Thursday.

Bankman-Fried was applauded on Nov. 30 during a live streamed interview with Andrew Ross Sorkin at the New York Times DealBook Summit, in which the former CEO admitted, “look, I screwed up.”

Witnesses, investors and customers are being asked to voluntarily provide information on a list of FTX employees and associates, according to people familiar with the matter. That includes conversations with FTX executives or other information that might help a criminal investigation.

FTX collapsed after a Nov. 2 CoinDesk article examined its financials and lawyers began questioning whether the exchange had engaged in fraudulent activity by misusing customer funds.

New FTX CEO Ray said in a court filing that the company had concealed the misuse of corporate funds. “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.

Questions at stake in the FTX case are “simply too large and too important to be left to an internal investigation,” Vara said in the court filing.

So far, no one has been accused of wrongdoing.

“Regulators have some egg on their face,” said Mike Novogratz, whose Galaxy Digital crypto firm had a $76.8 million exposure to FTX, in a Bloomberg TV interview Thursday. “Sam was very far along at pitching to be the cash Bitcoin market here in the US, both with the SEC and CFTC.”

BREAKING – US Department of Justice demands fraud investigation of FTX, claims there is "substantial evidence" that SBF and other managers "engaged in fraudulent conduct"

— Bitcoin Magazine (@BitcoinMagazine) December 2, 2022