Report: FTX Sues Bahamian Liquidators, Says US Entity Was HQ
Even though US and Bahamian authorities say they are working together to recover FTX assets, the lawsuit shows that they have a different point of view.
Since FTX collapsed without warning in November, regulators and courts in both the United States and the Bahamas have been working hard to get as many of the assets held by FTX back into the hands of their original owners.
While court cases in the US have been put on hold, in part because SBF is claiming innocence, Bahamian regulators were able to seize some assets right away and seem to be closing in on FTX Digital Markets, the failed crypto exchange’s Bahamian subsidiary.
Bahamas Entity’s Prominence
The current lawsuit is against the Bahamian government officials who are in charge of closing down FTX Digital Markets. If the former wins the lawsuit, it could mean that the US courts will sell off more of the assets that were controlled by FTX. This could mean that US customers will get more money back at the expense of international customers.
John J. Ray III, the new CEO of FTX, filed a request with the Delaware bankruptcy court saying that FTX Digital Markets “had no ownership interest in FTX.com’s cryptocurrency, intellectual property, and customer relationships.” This started the process.
The interim leader of FTX said that FTX DM was nothing more than a shell company made to move money away from US regulators. He also said that FTX DM was not important to the exchange’s legitimate operations.
“(FTXDM) was a corporate shell and the centrepiece of founder Sam Bankman-Fried’s effort to funnel FTX Trading customer deposits and other valuable property and rights to the Bahamas, out of the reach of American regulators and courts.”
The Bahamian government says that FTX DM was the main center.
Even though FTX US said that FTX DM never did anything important for the FTX Group in terms of operations, Bahamian regulators asked the local Supreme Court to decide which entity was more important to the exchange’s operations and which should pay customers when the dust settles.
The fact that FTX moved its headquarters from Hong Kong to the Bahamas, according to Bahamian liquidators, shows that FTX DM was much more than just a shell company. Also, liquidators in the Bahamas say that the company’s business plans and a change to its terms of service from May 2022 show a “clear intention” to move customer deposits to FTX DM.
Even though FTX US and Bahamian authorities agreed to work together on recovery, they disagree about how important FTX DM is. Authorities in the Bahamas say that the cooperation memorandum doesn’t stop them from trying to find out which FTX entity was most important to the operation of the now-defunct crypto empire.
