Lawyers at bankrupt crypto exchange FTX are set to face a court hearing on Wednesday against demands for internal records from a bankrupt Bahamas-based subsidiary as the two wrestle over what remains of the once-high-flying deal.
In the emergency hearing on Wednesday, liquidators of FTX Businesses in the Bahamas will ask US Bankruptcy Judge John Dorsey to grant them access to US units Relaxed, Google and Amazon Web Service Accounts and Data.
FTX’s attorneys urged Dorsey to deny the motion. They argued that Bahamian regulators worked with FTX founder, recently arrested Sam Bankman-Fried, to undermine the US bankruptcy case and siphon assets to the detriment of some creditors.
FTX, its hedge fund Alameda Research and dozens of subsidiaries filed for US bankruptcy last month after the trading platform suffered an onslaught of withdrawals and a failed bailout deal.
That same week, authorities in the Bahamas, where the company was headquartered, appointed bankruptcy trustees to handle FTX’s international trading business.
The dispute between FTX’s US bankruptcy team and attorneys appointed to oversee the liquidation of Bahamas-based FTX Digital Markets aired in Congress on Tuesday.
John Ray, who was appointed chief executive of bankrupt FTX, told a congressional committee that the Bahamian government worked with Bankman-Fried to help account holders in the country withdraw $100 million from the bank crypto exchange just as it went bankrupt.
Ray called the actions of the Bahamian government “alarming” and implied that the people of the Bahamas have something to hide.
“Unlike the Chapter 11 trial, there is no transparency in the Bahamas trial,” Ray said. “We repeatedly asked them for clarification on what they were doing and we were shot down on that.”
The Securities Commission of The Bahamas (SCB) disputed Ray’s “false statements” about the Bahamian government’s response to FTX’s collapse.
Ray’s most recent court filings included a partial transcript of emails between attorneys for the US bankruptcy team and Bahamian liquidators that created “a false impression” that Bahamian citizens would be protected at the expense of FTX’s other clients, the SCB said in a statement.
All improper distributions to Bahamian citizens are subject to appropriate statutory recovery actions, the SCB wrote.
Bankman-Fried was arrested in the Bahamas Monday and is being held while awaiting extradition to the United States to face criminal and civil fraud charges.
© Thomson Reuters 2022
