The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators have to-date gained control of just 30 percent of the local subsidiary’s $255.2m cash assets despite locating fresh recoveries in Switzerland.

Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, in their third report to the Supreme Court revealed that they have identified a further $35.7m in FTX Digital Markets’ name at a Swiss financial institution.

However, until they are officially recognised by the Swiss courts as FTX Digital Markets’ liquidators, they are unable to gain control over the funds held in a bank account with Kiarpay AG. Together with the $143.2m seized by the US Justice Department as restitution for the collapsed crypto exchange’s victims, some $178.9m or 70 percent of the Bahamian subsidiary’s cash assets remain outside the trio’s reach.

“Since the last report, the liquidators have identified further cash held in accounts in the name of FTX Digital Markets with Kiarpay AG,” Mr Simms and the PwC duo revealed. “These funds have been secured to the control of the liquidators on behalf of FTX Digital Markets.

“The liquidators were initially granted control over the bank accounts held in FTX Digital Markets’ name with Kiarpay AG. However, Kiarpay AG provided notice that they require evidence of court recognition in Switzerland to enable the liquidators to operate the account. On July 15, 2023, the liquidators instructed Swiss counsel who have applied to obtain recognition.

“Access to the funds is restricted pending the determination of an application for formal recognition of FTX Digital Markets’ liquidation proceedings in The Bahamas. The liquidators continue to investigate the existence of further funds or other assets, and to examine whether funds held by other parties, including affiliates and related parties, belong to FTX Digital Markets.”

The $35.7m held by Kiarpay represents a valuable source of fiat cash recovery for FTX Digital Markets creditors, investors and clients, as well as potential financing for the work of the liquidation trio. Thus far, Mr Simms and his PwC colleagues have gained control of just $76.3m of the Bahamian subsidiary’s identified $255.2m in cash assets.

The recoveries thus far include $31.5m that was held by Fidelity Bank (Bahamas); $300,000 with Deltec Bank & Trust; $26.7m with Equity Bank; and $18.1m with BCB Bank. However, some $178.9m presently remains outside the liquidators’ reach, with the bulk of that sum representing the monies seized by the US Justice Department around year-end 2022.

The Bahamian liquidators’ third report was almost as notable for what it did not say as its actual contents. Previous reports confirmed the trio were negotiating with the Department of Justice for the $143.2m’s return, and were even contemplating legal action against the US federal government institution if talks did not result in a fruitful outcome.

The only mention in the latest report, dated November 10, was that the Supreme Court authorised the liquidators to continue talking to the US Justice Department “in relation to the funds in bank accounts in the US in the company’s name that have been seized.. and, if so advised, issuing proceedings in the US against the Department of Justice for the release of said funds”.

There was also no reference to any plans to pursue the estimated 1,500 “Bahamian” clients who received preferential treatment when Sam Bankman-Fried, the FTX founder recently found guilty of multiple fraud-related crimes by a New York jury, allowed them to withdraw a combined $100m in assets in violation of Bahamian and US court asset freezes.

The $86.2m in cash balances inherited by the Bahamian liquidators, when they took control of FTX Digital Markets on November 14, 2022, have since reduced by 45.5 percent or $39.2m to $47m at end-October 2023. Most of the reduction is attributed to the combined $34.5m paid to the liquidators ($22.2m) and their advisers ($12.3m) as approved by the Supreme Court to cover their costs.

Other costs have been incurred in safeguarding assets belonging to FTX Digital Markets and its creditors, which has required the payment of insurance, maintenance and security fees. The Bahamian liquidators have also placed the four One Cable Beach properties into the complex’s rental pool as a means to recoup holding costs.

Talks between the trio and John Ray, the FTX US chief heading 134 entities in Chapter 11 bankruptcy protection, on developing an “overall strategy to preserve value and ultimately maximise” creditor recoveries through selling the crypto exchange’s 41-strong Bahamian property portfolio - purchased for a collective $256m - have resumed.

“The liquidators held meetings with the debtors during the last three months to develop the sales strategy further and, in the interim, have continued to discuss options with brokers and take actions to maintain the status quo with respect to the properties,” the third Supreme Court report said.

“This includes actions to preserve and protect them as relevant by way of insurance renewals, repairs and liaising with One Cable Beach to place four properties into the rental pool to cover ongoing holding costs. These costs have been met at the expenses of the FTX Digital Markets estate, in line with the pre-bankruptcy position on the basis that FTX Digital Markets will be indemnified from the sale proceeds.”

The Bahamian liquidators have warned FTX clients, though, that covering the winding-up costs by using a yet-to-be determined proportion of their assets held in a trust, fiduciary or escrow capacity has been approved by the Supreme Court.

And the trio were also, on June 22, 2023, given permission by the Supreme Court to reimburse the Securities Commission for some $3.776m in legal fees, expenses and other disbursements incurred as a result of FTX’s collapse. These costs related to the regulator’s US legal fees plus expenses related to the storage, and safeguarding, of digital assets transferred to its care from FTX Digital Markets.

The monies were paid using $10m held with Fidelity Bank (Bahamas) as a “restricted amount” related to FTX’s licence from the Securities Commission.