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FTX Bahamas creditors given claims extension

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators have told creditors that they will likely have an extra 10-12 weeks until at least end-July to submit proof of what the imploded crypto exchange owes them.

Brian Simms KC, the Lennox Paton senior partner, and Kevin Cambridge and Peter Greaves, the PricewaterhouseCoopers (PwC) accounting duo, confirmed in a letter to former investors and clients that the original May 15 deadline to submit claims - which expired on Wednesday - has been extended by at least two-and-a-half months.

“We had initially set a bar date of May 15, 2024, for submitting proof of debt forms in The Bahamas’ process. The bar date is intended to represent the last date that customers of FTX.com (or FTX International) can lodge a claim and be eligible to participate in The Bahamas’ process,” the wrote.

“The bar date will be extended to a date and time that is aligned with the voting deadline for creditors to approve a Chapter 11 reorganisation plan in the US process. Although a new bar date has not yet been fixed, the joint official liquidators of FTX Digital Markets expect the bar date to be towards the end of July, or early August, giving customers at least a further 10-12 weeks to submit a claim in The Bahamas process.”

The extension has been granted because John Ray, the FTX US chief in charge of 134 entities presently in Chapter 11 bankruptcy protection in Delaware, and his team have yet to obtain US court and investor/creditor approval of their reorganisation plan for the crypto exchange.

The cut-off period for accepting creditor claims in The Bahamas must be aligned with that of Mr Ray’s in the US under the terms of the global settlement agreement the latter concluded with the local liquidation trio.

Under the terms of that deal, both FTX’s Bahamian liquidators and Mr Ray are pooling all recovered assets into one giant pot that will be used to compensate creditors by the same amounts, terms and conditions regardless of whether they submit their claims locally or in the US. As a result, both sides have to closely co-ordinate the timing of their respective claims acceptance deadlines and payouts.

“Customers of FTX.com (or FTX International) may participate in either The Bahamas process or US process, but cannot participate in both. Customers will be sent disclosures in June setting out the implications of participating in either process and will have six to eight weeks from the date that disclosures are issued to make their final elections,” the Bahamian liquidation trio said.

“Although there may be some differences between The Bahamas process and the US process, customers are expected to receive the same distribution at the same point in time.” The Bahamian liquidators for FTX Digital Markets are also supporting the Chapter 11 reorganisation plan that will see the crypto exchange’s creditors and investors recover more than they are owed.

“The plan does more than return petition date value to creditors: It includes potential incremental recoveries to compensate creditors for the time value of their money trapped at the FTX group since the petition date [November 11, 2022]. Indeed, the debtors currently forecast that customers and digital asset loan creditors will recover between 118 percent and 142% percent of their petition date claim values,” Mr Ray revealed.

“The monetisation effort has been successful and the debtors currently expect to have approximately $12.8bn in cash as of the expected effective date of the plan, enough to pay all non-governmental customers and creditors in full based on the petition date value of their claims, subject to the conditions and assumptions described in this disclosure statement.

“Now that the debtors have reached a situation where projected cash covers all non-governmental creditor claims, the debtors intend to continue to gradually monetise their remaining assets in order to maximise the amount available for payment of supplemental amounts to creditors.

“The debtors anticipate reducing all of these assets to cash opportunistically based on market prices and the timing of distributions, and certain assets may not be sold immediately but held for sale for some reasonable period of time based on the nature of the asset and market conditions.” FTX Digital Markets in The Bahamas was said to have almost 61,000 potential creditors.

FTX’s Bahamian liquidators previously asserted that the settlement with their US adversary “represents the best deal” possible given that lengthy legal battles would slash creditor recoveries “possibly to extinction”.

Mr Simms, in a January 12, 2024, affidavit filed with the Supreme Court alleged it was “extremely unlikely that more favourable terms could be achieved” with Mr Ray given that the Bahamian liquidation is in a “much weaker financial position” than their Chapter 11 counterpart.

While he and his fellow FTX Digital Markets liquidators have “repeatedly pushed back” against “unacceptable” offers by the FTX US chief, Mr Simms signalled that “limited assets” presently available to the trio would be exhausted by continuing their courtroom fight “with no end in sight”.

With the Bahamian trio controlling just 30 percent of the local subsidiary’s cash assets, due in large measure to the US Justice Department’s seizure of $143.2m from its US accounts in late 2022, the Lennox Paton senior partner conceded that assets available to pay creditors would ultimately be exhausted by the legal sparring and they would have to seek litigation financing that comes with its own risks.

And customer and FTX group assets and liabilities are “so commingled” and “inextricably intertwined that it would be practically impossible”, in addition to creating enormous delays and costs, to try and “unravel” what belongs to which liquidation estate - The Bahamas or Delaware.

Comments

ExposedU2C 1 month ago

With the Bahamian trio controlling just 30 percent of the local subsidiary’s cash assets, due in large measure to the US Justice Department’s seizure of $143.2m from its US accounts in late 2022, the Lennox Paton senior partner conceded that assets available to pay creditors would ultimately be exhausted by the legal sparring and they would have to seek litigation financing that comes with its own risks.

And customer and FTX group assets and liabilities are “so commingled” and “inextricably intertwined that it would be practically impossible”, in addition to creating enormous delays and costs, to try and “unravel” what belongs to which liquidation estate - The Bahamas or Delaware.

The creditors of FTX/Alameda got royally screwed by the unnecessary massive depletion of the FTX group assets by the Bahamas based liquidators. Millions of dollars in liquidators' fees and related other costs were squandered as a result of the Bahamas based liquidators' refusal to recognise early on that it was impossible to reconstruct accounting records that simply did not exist. The Bahamas based liquidators also should have recognised and accepted early on that their many turf skirmishes with John Ray were futile and only good for their pockets as opposed to the creditors at large of the FTX group.

The financially fattened Bahamas based liquidators are only now willing to throw in the towel because of their own exposure to the greatly increased risk of significant downside changes in both the real estate and crypto markets that could cause huge realised losses to the FTX group's estate. And of course the creditors would be justified in blaming the losses on the inordinate delay caused to the FTX group's liquidation process by the Bahamas based liquidators.

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