The Bahamas liquidators are seeking to exclude over $200 million worth of luxury properties in the country from the estate of FTX, as the failed crypto exchange seeks to wind up and repay creditors in the U.S., court documents filed on Monday revealed.
Meanwhile, lawyers for FTX’s new boss, John Ray III, are attempting to fight off attempts by what they say are “reckless” attempts by Bahamas-based administrators to secure access to the defunct exchange’s IT systems, in legal proceedings that have rapidly become as messy as the crypto exchange’s own governance.
Unsuccessful attempts by former FTX chief Sam Bankman-Fried to get back his password for company systems, apparently at the urging of Bahamas joint provisional liquidators (JPL), “highlight the recklessness with which the JPLs and the Bahamian authorities are approaching the security of the Debtors’ assets and systems,” a filing on behalf of FTX’s new U.S. management said.
“The last time these individuals had access to the Debtors’ systems, they used such access to transfer assets belonging to the Debtors,” the filing added.
A brief reopening of FTX exchange between Nov. 10 and Nov. 11, the day Bankman-Fried resigned and the company filed for bankruptcy protection, led to $100 million in crypto being withdrawn by 1,500 customers who were, or purported to be, Bahamian, the filing said.
Bankman-Fried had on Nov. 10 promised Bahamas Attorney General Ryan Pinder that he would segregate funds for local customers and allow them to withdraw, according to an email filed with the court.
In a Dec. 7 letter, lawyers for Bahamas liquidators warned of “potentially severe adverse impacts” and the risk of dissipation of assets if they aren’t immediately granted access to FTX systems, such as Amazon Cloud and Google Drive.
Meanwhile, in a separate court filing, Bahamian liquidators say the holding company of a series of 35 luxury Bahamas villas, the most expensive of which costs $30 million, was unlawfully transferred into U.S. hands, as lawyers squabble over which country has jurisdiction.
The portfolio was supposedly under control of both FTX CEO Sam Bankman-Fried and co-Chief Executive Ryan Salame – but Salame may never have approved the real estate holding company to be included in Chapter 11 bankruptcy proceedings, Brian Simms, a liquidator appointed in the Bahamas, told the Delaware court.
“An action of one director is a nullity under Bahamian law when the consent of two directors is required,” Simms said. “Bahamian law does not allow for recognition for a foreign insolvency proceeding of a Bahamian corporation” such as that which owned the properties.
After taking over as chief executive on Nov. 11, Ray told the court that FTX was one of the biggest governance failures he had seen in his 40-year restructuring career. Ray cited a failure to document the structure of the 100-plus entities in Bankman-Fried’s empire, the staff on his payroll or the status of Bahamas properties given to staff.
Bankman-Fried had been due to testify before a U.S. House of Representatives committee on Tuesday, but this has been thrown into doubt after news that Pinder has ordered Bankman-Fried’s arrest pending extradition to the U.S.