The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s founder says he “wishes to be heard” at today’s Supreme Court hearing on the winding-up petition intended to place the crypto exchange’s Bahamian subsidiary into full liquidation.

Christina Rolle, the Securities Commission’s executive director, in a November 9, 2023, affidavit filed in support of FTX Digital Markets’ full winding-up, revealed it is uncertain how Sam Bankman-Fried will be heard from the New York jail cell where he presently resides after a jury last week found him guilty on all seven fraud and other criminal counts.

“By letter dated November 6, 2023, counsel for Mr Bankman-Fried, Krystal Rolle KC, informed counsel for the Commission that her client ‘wishes to be heard’ on the hearing of the petition, but she was unable to confirm that she would be ‘sufficiently instructed to make representations on November 10’,” Christina Rolle said. “Therefore, she might require additional time.”

Mr Bankman-Fried will otherwise have to shout very loudly from his New York cell to be heard in Nassau at today’s hearing. It is unclear whether Krystal Rolle’s difficulty in obtaining instructions from the embattled FTX founder, who is presently facing a sentence of up to 110 years in prison, would be sufficient to delay the winding-up petition’s hearing or a decision on whether to grant it.

Krystal Rolle, in her letter to Robert Adams KC, the Delaney Partners attorney representing the Securities Commission, said: “We hereby give notice that Mr Bankman-Fried wishes to be heard on the winding-up petition. However, as you can well imagine, our ability to obtain instructions from Mr Bankman-Fried has its challenges by reason of his incarceration.

“As such we are unable to confirm that we will be sufficiently instructed to make such representations on November 10, 2023. We must therefore foreshadow that we may require additional time for this purpose. In any event, we are endeavouring to obtain Mr Bankman-Fried’s further instructions and shall provide further confirmation as soon as our instructions in this regard are solidified.”

The only other interested party to confirm their appearance at today’s FTX Digital Markets winding-up petition hearing are Peter Maynard & Company, the Bahamian attorneys for John Ray, the FTX US chief who has control of some 134 FTX entities in Chapter 11 bankruptcy protection in the US.

He and his team have been locked in a months’ long acrimonious legal battle with the Bahamian provisional liquidators for FTX Digital Markets, who are Brian Simms KC, the Lennox Paton senior partner, and the PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves.

Christina Rolle yesterday backed the trio’s appointment as full liquidators on the basis that each has “gained knowledge” of FTX Digital Markets’ operations over the past year.

“In addition, on behalf of FTX Digital Markets, the joint provisional liquidators are engaged in legal proceedings before the Bankruptcy Court in Delaware, US, and time sensitive negotiations to fully resolve such proceedings and promote the harmonious administration of the insolvent estate of FTX Digital Markets and other entities in the FTX group of companies,” she said.

“Considerable time and expense would be required for new individuals to acquire such knowledge and understanding to effectively act in place of Messrs Simms, Cambridge and Greaves to the detriment of the creditors and customers of FTX Digital Markets. Such likely time and expense would be contrary to the interest of the creditors and customers of FTX Digital Markets and the public.”

FTX Digital Markets’ two directors when the crypto exchange collapsed exactly one year ago on November 10, 2022, were Mr Bankman-Fried and Ryan Salame. The latter and his Bahamian attorney, Damian Gomez KC, have given no indication they will appear at today’s hearing. Mr Salame as pled guilty to US criminal charges, including unlawful election contributions, and is due to be sentenced on March 6, 2024.

“Ar the time of presenting this petition, the Commission no longer had confidence in the directors and managers of FTX Digital Markets to manage the company in accordance with the standards prescribed in the Digital Assets and Registered Exchanges Act due to their repeated failure to comply with the Commission’s request for information,” Christina Rolle alleged.

“In this regard, the Commission’s loss of confidence was well-founded.... Neither Ryan Salame nor Samuel Bankman-Fried could be considered fit and proper individuals to serve as directors of FTX Digital Markets, and both of them are incapable of discharging any management function in relation to FTX Digital Markets.”

FTX Bahamas’ provisional liquidators and their US adversary earlier this week suspended all scheduled legal filings as they bid to resolve their dispute outside the courtroom.

Documents filed with the Delaware Bankruptcy Court reiterated that the FTX Digital Markets trio and Mr Ray “are making progress” in efforts to reach a co-operation agreement and avoid further time-consuming and costly legal battles that only disadvantage the crypto exchange’s creditors.

“The parties are making progress on resolving this adversary proceeding and believe it is in their best interests to focus their attention on promptly concluding discussions and documenting any such resolution,” their joint legal filing yesterday confirmed.

As a result, both sides “agree to an abeyance of all deadlines” relating to upcoming legal filings so that they can have time and space to settle their differences away from the courts. The “adversary proceeding” is the legal action initiated by Mr Ray in Delaware in a bid to cut-off FTX Digital Markets and the Bahamian liquidators from securing any of the crypto exchange’s assets for their respective winding-up estate.

Mr Simms and the PwC duo, in their last update to creditors in late October 2023, said: “The joint provisional liquidators have been engaged in adversary proceedings initiated by the Chapter 11 debtors and formal mediation.

“Outside of those proceedings, the joint provisional liquidators have also engaged in constructive informal discussions relating to the co-operation between the FTX Digital Markets estate and the Chapter 11 debtors. The return date for the court hearing has been rescheduled to enable sufficient time for those discussions to play out.”

Mr Ray and his team also likely need a settlement to progress their Chapter 11 reorganisation plan for FTX given that critical questions governing how the crypto exchange’s multi-jurisdiction liquidation will proceed have yet to be answered.

For example, it still has to be determined which assets and clients belong in which estate - the Bahamian liquidation, or the Chapter 11 proceedings in Delaware. Once that is worked out, it will then be necessary to decide which assets belong to creditors and which to the exchange. Thus far, 45,878 individuals, 958 institutions and 86 trade creditors have submitted a collective 46,922 claims against FTX Digital Markets.

Answering the outstanding questions was why the Bahamian trio, in their first Supreme Court report, had recommended extending FTX Digital Markets’ liquidation by a further six months to August 2023. That has now morphed into a near nine-month extension.