The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The sell-off of FTX’s high-end properties “will not be sufficient” to fully repay the $256.3m debt owed to the crypto exchange’s Bahamian subsidiary, it has been asserted.

John Ray, head of the 134 FTX entities in Chapter 11 bankruptcy protection, alleged in legal documents late last week that the estimated “total net sales proceeds” generated from disposing of 35 properties acquired for a combined $222m will not be enough to totally clear FTX Digital Markets’ claim.

The filings, which represent Mr Ray’s bid to obtain Delaware Bankruptcy Court approval of his settlement with the Bahamian liquidators of FTX Digital Markets, also reveal the identities of prominent local persons and international sporting giants who sold their properties to the crypto exchange after it arrived in this nation in September 2021.

Greg and Gabriella Curry, owners of Cafe Matisse, the well-known downtown Nassau restaurant that closed last August as the couple retired, were disclosed as the vendors of an Old Fort Bay property that was acquired by FTX Property Holdings. Described as lots 5A and 5B in the community’s Fincastle Island section, the documents did not identify this as the property acquired for Sam Bankman-Fried’s parents.

Meanwhile, the seller of condominium unit 2C in Albany’s Honeycomb complex was identified as Canadian tennis player Milos Raonic, who has been ranked as high as the world’s third best and lost the 2016 Wimbledon final to Andy Murray. 

And the vendor of condominium 1B in Albany’s Cube building was named as Bryson Aldrich DeChambeau, the American professional golfer and winner of the 2020 US Open major, who has joined the Saudi-backed LIV Golf tour.

These disclosures came as Mr Ray effectively admitted that part of the reason he decided to settle with the Bahamian liquidation trio of Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, was to gain some control over the sale of FTX’s Bahamian real estate portfolio and the proceeds.

His legal filings revealed that FTX Property Holdings’ Chapter 11 case could not be “recognised” in The Bahamas since that entity is Bahamian-incorporated. Thus, as a result, “no viable insolvency regime” exists through which Mr Ray and his team could control the properties’ sale and disposal.

Referring to FTX Property Holdings as FTX PropCo, Mr Ray said it was incorporated in The Bahamas on July 22, 2021 - almost two months before the crypto exchange received the necessary licensing and approvals to operate in this nation. Its sole purpose was to acquire, and hold, commercial and high-end real estate purchased for use by FTX and its senior executives.

“FTX PropCo conducted no business other than the purchase and ownership of real property in The Bahamas and does not have other significant assets,” Mr Ray affirmed. “The aggregate purchase price of the Bahamas properties was approximately $222m.

“Purchase prices paid by FTX PropCo in respect of each of the Bahamas properties range between approximately $500,000 and approximately $30m. Five properties were less than $1m; 24 properties were between $1m and $10m; three properties were between $10m and $15m, and three properties exceeded $15m.

“FTX Digital Markets is the largest creditor of FTX PropCo. On June 29, 2023, FTX Digital Markets filed a proof of claim against FTX PropCo in the amount of $256.291m in respect of loans allegedly granted by FTX Digital Markets to FTX PropCo for both the acquisition and maintenance of the Bahamas properties,” the FTX US chief added.

“Based on guidance from brokers in The Bahamas, the debtors currently estimate that the total net sale proceeds from the disposition of real estate owned by FTX PropCo will not be sufficient to pay the [$256m FTX Digital Markets claim] in full and, as a result, such claim is expected to be impaired in any Chapter 11 plan with respect to FTX PropCo.”

The nature of the “guidance”, or the brokers who provided it, were not identified. The extent of the recovery from selling-off FTX PropCo’s real estate holdings remains to be seen given that the high-end market for Bahamian real estate appears to be holding firm, though not quite at the levels generated by pent-up demand post COVID-19.

Most of FTX PropCo’s residential holdings are located in Albany, plus the GoldWynn development at Goodman’s Bay at One Cable Beach. The commercial properties include the site earmarked for FTX’s Bahamian headquarters at Bayside Executive Park on West Bay Street, plus Pineapple House and multiple units at the Veridian Corporate Centre.

Mr Ray, though, said he and his team were unable to secure recognition of the Chapter 11 proceedings from the Bahamian Supreme Court. “On February 14, 2023, following an application made by the debtors, the Bahamas court entered an order recognising Kurt Knipp as the foreign representative of certain debtors in The Bahamas,” he revealed.

“However, the debtors were unable to have FTX PropCo’s Chapter 11 case recognised (or a foreign representative appointed) in The Bahamas on the basis that, under Bahamian law, recognition is not available to entities that, like FTX PropCo, are incorporated in The Bahamas... The debtors understand that no viable insolvency regime exists for recognition of FTX PropCo’s Chapter 11 case in The Bahamas.”

To gain a measure of control and influence over how FTX’s Bahamian real estate is liquidated for the benefit of creditors and investors, Mr Ray’s filings revealed he and the Bahamian liquidators have entered into “The Bahamas’ properties exclusive sales agency agreement” that has to be approved by both the Supreme Court and Delaware Bankruptcy Court.

This involves FTX PropCo appointing FTX Digital Markets, and the Bahamian liquidators, as its “exclusive agent with powers to conduct the management, preparation for sale, marketing and sale of The Bahamas properties”.

The trio will have “the full exclusive powers, as the agent of FTX PropCo, to appoint and engage real estate agents to market The Bahamas’ properties for sale; elicit or encourage expressions of interest or bids for the disposition of The Bahamas’ properties; and conduct negotiations with any potential purchaser or other interested person for any disposition of The Bahamas’ properties”.

However, FTX PropCo, which is under Mr Ray’s control, “has the sole and exclusive right to” approve both the disposition of one of the 35 properties or entering into a sales agreement for any of them. Without its approval, any sale will be “null and void”.

And, while FTX Digital Markets can recommend a sale and enter into a binding agreement for such a deal, it must back this up by giving Mr Ray “all offers received by the liquidator; a broker price opinion including a comparative property sale analysis produced by a well-respected real estate broker; (any valuation reports available to the liquidators; and any other information or documentation that FTX PropCo may reasonably request”.

“The Bahamas properties exclusive sales agency agreement reflects the recognition of the debtors that FTX Digital Markets and a large part of the liquidators’ team are physically located in The Bahamas and can therefore more efficiently manage the sale operations under the debtors’ supervision and subject to the debtors’ approval rights,” Mr Ray and his team alleged. 

“Pursuant to the Bahamas properties exclusive sales agency agreement, FTX Digital Markets shall, through the liquidators, take the operational lead in managing the value-maximising disposition of The Bahamas properties.

“The liquidators’ team is also well-positioned to manage the sales process because they represent FTX PropCo’s largest creditor and, therefore, have a direct interest in maximising value for the benefit of FTX Digital Markets’ estate.” Gross proceeds from the sales will be used to satisfy FTX Digital Markets; $256m claim.

Mr Ray’s filings also request the Delaware Bankruptcy Court’s approval of “sales procedures” that will help to speed-up the sale of the 35 Bahamas-based properties and ensure they are not ensnared by the need to seek time-consuming court approvals for each disposal.

“To alleviate the cost and delay of filing a separate motion for each proposed sale of the Bahamas properties, and to eliminate any uncertainty regarding the debtors’ authority to consummate certain transactions, the debtors seek approval of expedited procedures to govern the sale of The Bahamas properties,” he added.

“The debtors do not, at this time, have a specific proposed sale or buyer for any of the Bahamas properties. Rather, to allow the marketing of the Bahamas properties by the liquidators pursuant to the Bahamas properties exclusive sales agency agreement, and to obtain maximum value and to facilitate a more expeditious and cost-effective review of each sale by the debtors and other parties-in-interest, the debtors propose to utilise the sale procedures.”

Mr Ray and his team added: “Sales pursuant to the sale procedures will enable the debtors to defray or avoid any operational, carrying or other expenses associated with certain of the Bahamas properties, including homeowners association fees, utility payments, maintenance fees and real property taxes”.

They will also “protect the debtors against the possible declining value of certain Bahamas properties, and minimise the costs associated with selling these assets through the use of more streamlined processes appropriate for luxury real estate assets.

“Obtaining court approval for each sale would result in unnecessary administrative costs attendant to drafting, serving and filing pleadings, as well as time incurred by attorneys for court appearances and potentially conducting expansive marketing processes and auctions, which could drastically reduce the ultimate net value of these assets,” Mr Ray added.

“The proceeds that will be generated by many, if not all, of the sales of the Bahamas properties do not warrant the incurrence of such expenses. Moreover, the sale procedures will enable the debtors to seize sale opportunities that may be available only for a limited time, resulting in recovery of certain value for the Bahamas properties through their prompt monetisation.

“The Debtors may face stringent time constraints in terms of meeting the closing deadlines established by interested purchasers. The sale procedures will permit the debtors to be responsive to the needs of interested purchasers and thereby guard against lost sales due to delay, while still providing interested parties with the ability to review more significant transactions.”