FTX US and Bahamas bankruptcy teams make peace in rival cases
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Rival teams leading FTX bankruptcy cases in the US and Bahamas, who have been at odds over the bankruptcy process for the cryptocurrency exchange, reached a cooperation agreement on Friday after weeks of public feuding.
Under the agreement, “the parties will begin working together to share information, secure and return property to their estate, coordinate litigation against third parties, and explore strategic alternatives to maximize recovery from stakeholders,” the two bankruptcy teams said in a statement on Friday.
FTX, along with more than 100 companies in Sam Bankman-Fried’s cryptocurrency empire, filed for Chapter 11 bankruptcy in Delaware in November. But the crypto exchange’s corporation in the Bahamas, where it was headquartered, was embroiled in a separate case by a local court that appointed bankruptcy trustees to oversee the collapsed firm.
John Ray, the veteran bankruptcy attorney who oversaw the bankruptcy of Bankman-Fried’s Delaware company, has clashed with the Caribbean nation’s Bahamian liquidators and regulators, accusing them of violating US bankruptcy procedures. The Securities Commission of the Bahamas, meanwhile, said Ray’s group has a “cavalier attitude toward the truth.”
The international row threatened to complicate the widespread bankruptcy of FTX Group, which was once worth more than $32 billion.
In the two bankruptcy proceedings, a comparison must be made as to which assets belong to which companies. And which of these are able to repay creditors. Ray has criticized FTX’s past management for a lack of record keeping and blurry lines between different companies.
FTX had accused the Bahamas of colluding with Bankman-Fried to unlawfully seize the cryptocurrency wallets it owned around the time of the Nov. 10 US bankruptcy filing. The island nation later valued this crypto at $3.5 billion. The FTX team in the US said in court filings that the seized currency, which consisted mostly of FTX’s own token, FTT, was worth less than $200 million.
“There are some issues that we still don’t agree on, but we have resolved many of the outstanding issues and have a way forward to resolve the rest,” Ray said in Friday’s statement. The deal will go to courts in both jurisdictions for approval.
To implement the ceasefire, the sides must put escalating tensions to one side. Ray’s group has said the Bahamas liquidators were too close to the country’s securities commission and that the two “worked closely together to put an end to it.” [the US] Judgment and Chapter 11”.
“We don’t trust the Bahamian government,” James Bromley, an attorney who works for Ray, said in a Delaware court last month. He said FTX will fight “with all its might” any attempt to “get the bankruptcy under control”.
The Securities Commission of the Bahamas said earlier this week that Ray’s “unsubstantiated statements encourage distrust of public institutions in the Bahamas.” The Commission declined to comment on the cooperation agreement.
The agreement lowers the temperature of one of several legal battles Ray is engaged in. Bankman-Fried personally intervened in his former crypto conglomerate’s bankruptcy on Thursday to assert his claim to more than $400 million in stock in online stockbroker Robinhood, which multiple parties including bankrupt crypto lender BlockFi were trying to claim .
The former billionaire’s lawyers said he needs “some of these funds to pay for his criminal defense.”
The shares were seized this week by the US Department of Justice by order of a judge in New York, where Bankman-Fried faces a criminal case over FTX’s collapse.
US prosecutors who charged Bankman-Fried with fraud and money laundering charges last month called victims of the alleged fraud on Friday who may want to be heard in court. Bankman-Fried has pleaded not guilty to the charges.
Additional reporting by Joe Miller in New York