The Tribune

• Claims Bahamas trio ‘hindering’ investor asset return

• Launches fresh broadside against nation in filings

• SBF, cronies ‘embedded themselves’ with leaders

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s US chief has resumed battle with the crypto exchange’s Bahamian liquidators by asserting that their “meddling is hindering” efforts to return recovered assets to former clients and creditors.

John Ray, in his latest broadside against FTX Digital Markets’ provisional liquidators and The Bahamas more generally, accused the trio of masquerading as “humble fiduciaries” when their real objective was to “usurp” himself and the Delaware Bankruptcy Court and seize control of the collapsed crypto exchange’s winding-up.

Pointing out that the vast majority of assets recovered to-day remain within his and the Delaware Court’s control, rather than under the Supreme Court’s jurisdiction, he was unable to resist a re-hash of previous attacks on The Bahamas, the Government and the Securities Commission as FTX’s regulator.

Mr Ray, who heads the 134 FTX entities in Chapter 11 bankruptcy protection, also alleged that one of the high-end Bahamian properties purchased by FTX had been acquired from one of its now-joint provisional liquidators. He did not, though, identify which of Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves, he was referring to.

Nor was the property in question identified, and Mr Ray seemingly provided no evidence to back-up his assertion. However, The Bahamas continues to be in his sights, as he reiterated allegations that embattled FTX co-founder, Sam Bankman-Fried, and the clique around him “spent considerable energy and money embedding themselves into the Bahamian political and legal establishment”.

Suggesting that the former FTX chief and his associates “quickly developed close relationships with high-placed Bahamian officials”, Mr Ray claimed that they “sought to leverage those relationships to minimise their criminal and civil exposure should the massive fraud be discovered”.

While again providing no evidence to back his assertions, the FTX US chief also argued that the Securities Commission’s transfer of hundreds of millions of dollars in digital assets to its sake-keeping in the days after the crypto exchange’s implosion breached the worldwide asset freeze imposed by the US Chapter 11 proceedings.

This, though, ignores the Securities Commission’s previous explanation that it acted to prevent FTX client assets being lost or stolen due to a suspected hack. Mr Ray also previously praised the Bahamian regulator’s actions when a temporary truce prevailed between him and the FTX Digital Markets liquidators in the aftermath of their January 6, 2023, co-operation agreement signing.

Now the FTX chief appears to have returned to the warpath, and The Bahamas as well as the crypto exchange’s clients and creditors are being caught in the crossfire. His latest onslaught also comes just weeks before he and the Bahamian provisional liquidators are scheduled to attend mediation before retired judge Judith Fitzgerald, highlighting the scale of the task she faces.

Mr Ray’s broadside also includes his ‘counterclaim to the counterclaim’ submitted by the Bahamian provisional liquidators to his original lawsuit, which sought to cut off their access to any assets caught in the crypto exchange’s multi-billion dollar collapse.

In response, besides seeking an order that he has breached their co-operation agreement, the Bahamian liquidators also want the Delaware Bankruptcy Court to affirm that Mr Ray and his team have breached the Chapter 15 recognition and asset freeze previously granted to FTX Digital Markets and themselves.

However, the FTX US chief hit back yesterday by pointing out that “virtually all property distributable” to former clients and creditors is under his and the Delaware court’s control. He implied that he only agreed to the January co-operation agreement so that his team would have some means of control over the liquidation of the crypto exchange’s $256m Bahamian property portfolio, which he described as “the most significant assets located in The Bahamas”.

“But the limitations of the co-operation Agreement became apparent to the FTX debtors almost immediately,” Mr Ray alleged in court filings. “Rather than allowing for an efficient division of responsibilities, it has emboldened the defendants [joint provisional liquidators] to interfere in matters entirely unrelated to FTX Digital Markets, FTX Property Holdings or The Bahamas.

“Since the co-operation agreement’s execution, the defendants have attempted to weaponize its terms in an effort to undermine this court’s jurisdiction over the Chapter 11 debtors’ assets, and the joint provisional liquidators’ meddling is hindering the Chapter 11 debtors’ ability to expediently return value to their creditors and stakeholders.

“Moreover, despite the defendants’ repeated assertion that they have ‘materially performed on all of their obligations under the co-operation agreement’, the defendants have, in fact, failed to adhere to the terms of the co-operation agreement.”

The Bahamian liquidation trio, though, have uttered exactly the same accusations against Mr Ray that he and his team have failed to abide by that agreement. The FTX chief, though, yesterday doubled down on allegations that The Bahamas is seeking to seize control of the crypto exchange’s fate via the legal process.

“From the beginning of these Chapter 11 cases, the joint provisional liquidators have advanced the view that they, aided by the Bahamian courts, are the sole and appropriate stewards of what remains of the FTX international exchange business and its assets - substantially all of which are currently in the custody of the debtors other than certain property seized by the US government,” Mr Ray alleged.

“But the joint provisional liquidators try to mask their intention, portraying themselves as humble fiduciaries who are simply fulfilling their basic duties as the joint liquidators of FTX Digital Markets. In reality, their larger ambitions are clear, as underscored by the expansive nature of their assertions in this proceeding.....

“They seek to usurp the role of this court, the debtors in possession of nearly all of FTX’s assets, and the debtors’ independent management and directors who have worked tirelessly to maximise recoveries for customers and other creditors under the watchful eye of this court.”

Mr Ray then alleged that Mr Bankman-Fried and his associates chose to relocate FTX to The Bahamas as this would “give them a patina (veneer) of regulatory scrutiny to perpetrate their fraud”. He continued: “They spent considerable energy and money embedding themselves into the Bahamian political and legal establishment through, among other things, lucrative legal engagements and the acquisition of hundreds of millions of dollars in Bahamian real estate, including from one of the joint provisional liquidators himself.....

“The co-conspirators quickly developed close relationships with high-placed Bahamian officials... The co-conspirators sought to leverage those relationships to minimise their criminal and civil exposure should the massive fraud be discovered.

“To further their fraudulent scheme, the co-conspirators created FTX Digital Markets, a Bahamian entity. The purpose of FTX Digital Markets was not to serve as a legitimate regulated business, but rather to further facilitate the co-conspirators’ fraud, albeit with a veneer of legitimacy.”