FTX's US Leadership, Bahamas Liquidators Say They've 'Resolved' Most of Their Issues

The announcement follows weeks of allegations from each party.

AccessTimeIconJan 6, 2023 at 7:41 p.m. UTC
Updated Jan 9, 2023 at 3:19 p.m. UTC
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FTX's U.S. leadership and the company's Bahamas wing's court-appointed liquidators have formed a cooperation agreement addressing how assets may be inventoried and disposed of, among other issues, a press release Friday said.

FTX Trading, which is the entity behind the FTX.com exchange, filed for bankruptcy in the U.S. in November, while FTX Digital Markets, a Bahamas-based entity, entered liquidation proceedings the same month. The joint provisional liquidators (JPL) in the Bahamas and FTX Trading's U.S. leadership had butted heads over the past few weeks, alleging interference with their respective proceedings and arguing over jurisdictional issues. FTX, which has dozens of subsidiaries and related entities, launched a complex bankruptcy case when it filed, with branches in numerous countries. The U.S. and the Bahamas have taken the lead on actually working through the bankruptcy process so far.

Attorneys representing FTX Trading told a U.S. bankruptcy court judge that he should not allow the liquidators to access FTX's Amazon and Google cloud services or other IT tools.

"We simply don't trust that the JPLs will be able to hold this information and not provide it to the Bahamian government,” Sullivan and Cromwell attorney James Bromley said a month ago. “The Securities Commission of the Bahamas has already collaborated with the JPLs to obtain access to digital assets and to mint tokens.”

For its part, the Bahamas government and the liquidators have taken issue with how Ray and his team in the U.S. have handled the bankruptcy as well, saying the claim about minting tokens is inaccurate and even pushing back against the U.S. bankruptcy proceedings entirely.

The two sides have even had disagreements about the value of the assets held by the Bahamas. Last month, the Securities Commission of the Bahamas announced it had secured about $3.5 billion worth of FTX customer assets, which FTX Trading said was a misleading figure. The commission fired back this week, calling FTX's figure a "material misstatement."

In Friday's statement, FTX CEO John Ray III said the joint provisional liquidators had "constructive meetings" with his team in Miami this week.

"There are some issues where we do not yet have a meeting of the minds, but we resolved many of the outstanding matters and have a path forward to resolve the rest," he said.

Brian Simms, one of the liquidators, likewise said he "looked forward" to working with the U.S. bankruptcy managers.

According to the release, the parties will "work together to share information, secure and return property to their estates, coordinate litigation against third parties and explore strategic alternatives for maximizing stakeholder recoveries."

FTX Trading will be involved in the Bahamas liquidation proceedings and FTX Digital Markets will be involved in the U.S. bankruptcy cases, the statement said.

The liquidators will take charge of disposing of real estate tied to FTX, but both the U.S. bankruptcy court and Bahamas Supreme Court will oversee this process. Both courts will also be involved in confirming "the inventory of digital assets" controlled by the Securities Commission of the Bahamas.

Both courts have to sign off on the cooperation agreement, the statement said. A bankruptcy court in Delaware was supposed to hold a hearing addressing some of these jurisdictional issues on Friday morning, but the hearing had been pushed to Jan. 13.

UPDATE (Jan. 6, 2023, 19:57 UTC): Adds additional context.

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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.


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