The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian provisional liquidators yesterday pledged to “claw back” the $100m payout to 1,500 Bahamian clients as they blasted the failed crypto exchange’s US chief for “inflaming and untrue” statements.

Brian Simms KC, the senior Lennox Paton partner, and PricewaterhouseCoopers (Pwc) accountant duo Kevin Cambridge and Peter Greaves, hit back at John Ray, chief executive of the 134 FTX entities currently in Chapter 11 bankruptcy protection in Delaware, by accusing him of “stringing out” negotiations over their ability to access cloud-stored data for FTX’s Bahamian subsidiary.

The trio, in legal filings ahead of yesterday’s bankruptcy court hearing (see article on Page 1B), slammed Mr Ray’s “insinuation” that the Securities Commission had helped FTX’s now-jailed and indicted founder, Sam Bankman-Fried, to access digital assets despite the freezes imposed by both the Supreme Court and Chapter 11.

Blasting this as a falsehood, the Bahamian provisional liquidators accused the FTX US chief of using this to justify cutting off their access to data vital to progressing the winding-up of Bahamas-based FTX Digital Markets.

Referring to the e-mail sent by Mr Bankman- Fried to Ryan Pinder KC, the attorney general, on November 10, 2022, where he revealed his plan to permit Bahamian clients to withdraw funds through what are likely to be deemed fraudulent preferences, the provisional liquidators said Mr Ray had failed to produce any evidence proving the Securities Commission was in “close and frequent contact” with the FTX founder.

“Mr Ray went so far as to tell Congress that the e-mail evidenced ‘collusion’,” they added. “The insinuation here is that the Commission assisted Mr Bankman-Fried in the disposition of assets, and therefore the joint provisional liquidators should be stripped of their rights to access their own information. That allegation is equally inflaming and untrue.

“That very e-mail referenced was the same e-mail that the Commission used as evidence to obtain authorisation to commence FTX Digital’s insolvency proceeding in The Bahamas. In the declaration, which has now been unsealed, the Commission stated that it “cannot condone the preferential treatment of any investor or client of FTX Digital or otherwise” in the liquidation.

“Notwithstanding the US debtors’ incorrect aspersions, it is the goal, too, of the joint provisional liquidators to investigate and potentially claw back the alleged $100m in cryptocurrency withdrawals that occurred between November 10, 2022, and November 11, 2022 from 1,500 individuals, which the joint provisional liquidators believe were all from FTX Digital’s assets for FTX Digital’s customers,” the trio continued.

“It seems at best that the US debtors, who continue to employ employees and legal counsel who were indisputably present while frauds were committed, lack comity in refusing to produce FTX Digital information to the court-appointed fiduciaries of the company on the basis that it appears (contrary to any evidence) that the wrongdoer here was the Bahamian government.”

The Bahamian joint provisional liquidators added that Mr Ray’s legal filings, and public statements, were “replete with factual errors and erroneous allegations ranging from the extreme to the mundane, all of which improperly attack the Bahamian government, the Bahamian Attorney General [Mr Pinder], the Commission, the Bahamian court and the joint provisional liquidators.

“But, to be clear, all are distinct entities, just as the US government, the US Attorney General, the US Securities Exchange Commission, the US Bankruptcy Court, and US debtors are here.” The trio also argued that they had been willing to compromise with Mr Ray over access to the FTX Digital Markets data, and had reached out to begin negotiations more than one month ago. “The joint provisional liquidators have hardly sat on their hands and certainly did not ‘wait a month’ to request access to their own information of FTX Digital,” they said. “The joint provisional liquidators began requesting access to the property of FTX Digital, through the employees of FTX Digital, as soon as they were appointed and access was cut off to FTX Digital employees.

“On or around November 15, 2022, an information sharing protocol was discussed between US debtors’ counsel, Sullivan & Cromwell, and the joint provisional liquidators’ then counsel, Holland & Knight.... Given concerns that the US debtors were simply stringing the process along, the joint provisional liquidators felt that filing the emergency motion would be prudent while the US debtors continued to find a suitable time to meet.

“At no point at any of these exchanges did the US debtors raise the joint provisional liquidators’ rights to FTX Digital’s information or whether it would be sent to the Commission or Messrs Bankman-Fried and Gary Wang.... Despite attempting to appear co-operative, the US debtors have been stringing the process along,” the Bahamian provisional liquidators continued.

“In the first paragraph of their objection, the US debtors state (with zero evidence) that, if the court grants the relief requested by the joint provisional liquidators in the emergency motion, ‘full and total access of debtors’ cloud-based systems....would be provided immediately to the Government of the Bahamas and to Messrs Samuel Bankman-Fried and Gary Wang’.

“That allegation is both false and irresponsible. Had the debtors just made clear from the start that legitimate requests for necessary information would be met with seriatim excuses for non-production, the joint provisional liquidators would have filed the emergency motion long before last week, and it could have been heard on normal notice.”