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Bahamian Liquidators Say FTX Wasn’t Authorized to File for Bankruptcy in the US
Despite the company’s convoluted corporate structure, Bahamas-based lawyers say everything falls under the “FTX Digital Markets” umbrella – a Bahamian entity, subject to Bahamian law.
Updated Nov 16, 2022, 10:09 p.m. Published Nov 16, 2022, 9:34 p.m.
The bankruptcy proceedings of collapsed crypto exchange FTX are already shaping up to be chaotic – the collective 100-odd companies that filed for bankruptcy last Friday have an estimated one million creditors – but Bahamian liquidators threw another wrench into the process on Tuesday.
Bahamas-based lawyer Brian Simms, one of the provisional liquidators appointed by the Bahamas Supreme Court, said in a court filing that FTX was not authorized to file for bankruptcy in the U.S., adding that he “reject[s] the validity of any purported attempt to place FTX affiliates in bankruptcy.”
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Simms’ declaration came after he and other liquidators filed for Chapter 15 bankruptcy protection on behalf of the Bahamas arm of the insolvent crypto exchange – FTX Digital Markets – in the Southern District of New York (SDNY) on Tuesday. Chapter 15 bankruptcy is typically used in cross-border operations.
Read more: FTX’s Bahamas Arm Files For Bankruptcy Protection in the U.S.
Though Simms did not ask the court to dismiss the U.S. bankruptcy proceedings, he requested that the court recognize the validity of the Bahamian legal actions, which he said could “impact” U.S. proceedings for the other FTX-controlled entities.
That impact, Simms essentially argued in his declaration, boils down to this: FTX Digital Markets was the parent company of the entire FTX empire – and all of that empire’s assets ultimately belong to FTX Digital Markets.
“Despite the seemingly complex structure of the FTX Brand companies, the entire FTX Brand was ultimately operated from a single location: The Bahamas,” Simms wrote in his declaration. “All core management personnel likewise were located in The Bahamas.”
Simms has asked the court for provisional relief including the recognition of Bahamian bankruptcy and liquidation proceedings, and orders entrusting FTX’s assets located in the U.S. to Bahamian liquidators, authorizing “urgent discovery measures,” and preventing any of FTX’s assets to be “transfer[ed], encumber[ed] or otherwise dispose[d] of.”
A hearing to determine next steps is currently slated for Dec. 13.
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