The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamas wind- up “would be halted” without a deal with their US adversary, its liquidators have revealed, as they seek an extension to the legally-mandated 90-day deadline to hold a first creditor meeting.

Peter Greaves, the PricewaterhouseCoopers (PWC) accountant who is one of the liquidation trio for FTX Digital Markets, the crypto exchange’s Bahamian subsidiary, told the Delaware Bankruptcy Court that without a settlement

his creditors “could wait for years in order to even submit their proofs of debt, much less receive distributions” in this nation.

The Bahamian liquidators’ must gain approval for their settlement with John Ray, head of the 134 FTX entities in Chapter 11 bankruptcy protection, from the Delaware court as well as this nation’s Supreme Court given that they obtained Chapter 15 recognition as the main foreign proceeding in the US.

Branding FTX’s November 2022 implosion as “the largest digital asset to-date” that the world has ever seen, Mr Greaves asserted in a January 4, 2024, affidavit: “For well over a year, FTX Digital Markets and the debtors have been sparring over complex cross-border legal issues, including the par- ties’ respective legal rights regarding more than $9bn of claims and cross-claims for international and domestic assets....

“The settlement resolves the disputes between the debtors and FTX Digital Markets (and its foreign representatives), which raised many novel and complex legal issues in the largest digital asset cross- border insolvency to date.

“The settlement provides a landmark breakthrough in both the Chapter 11 Cases and Bahamian official liquidation, allowing for collaboration in the maximisation of the value of the FTX Group’s assets and the efficient adjudication of customer claims, with a collaborative approach that provides a road-map to accelerate distributions to creditors,” Mr Greaves continued.

“Thus, the settlement confers substantial benefits upon FTX Digital Markets and its estates while avoiding the risks and uncertainties of adjudicating the merits of FTX Digital Markets’ claims against the debtors in both this court and the Bahamas Court. Importantly, the settlement avoids the costs of potentially litigating the claims twice and, potentially, in two different fora.”

Warning that such legal battles would consume “significant time, money and other resources”, thereby depleting both the

Bahamian and Chapter 11 estates and potential creditor recoveries, Mr Greaves added: “This, coupled with the risks and uncertainties related to prosecuting all of FTX Digital Markets’ claims, makes entry into the settlement in FTX Digital Markets’ estate and creditors’ best interests.

“It is my view that the terms of the settlement are fair and reasonable and should be approved. The settlement provides for a mutually beneficial solution to the complex cross-border legal issues raised by the circumstances of the collapse of the FTX group in a way that ensures customers in both proceedings receive, at similar times, substantially similar distributions on their claims...

“Without the settlement, liquidation of FTX Digital Markets’ estate would be halted, and creditors could wait for years in order to even submit their proofs of debt, much less receive ditributions, in the Bahamian official liquidation.”

The latter statement again reflects how the Bahamian liquidation, which is in a much weaker financial position than Mr Ray, faced being financially starved into submission by the FTX US chief proceeding with the multiple legal battles and consuming all their assets and cash.

Meanwhile, Brian Simms KC, the senior Lennox Paton partner, who together with local PwC accountant, Kevin Cambridge, forms the rest of the FTX Digital Mar- kets liquidator trio, revealed in a January 12, 2024, affidavit that they are seeking a three-week extension to the date on which the first creditors meeting will be held.

“The potential customers and creditors of FTX Digital Markets with whom the joint official liquidators have been able to discuss the global settlement agreement are supportive of the joint official liquidators entering the global settlement agreement,” Mr Simms said in filings that form part of the trio’s bid for Supreme Court approval of their deal with Mr Ray.

“The joint official liquidators also seek an extension to the statutory 90-day dead- line to hold the first creditors meeting due to the fact that the sanction application will be heard on January 22, 2024, and it is only after this application has been deter- mined that the joint official liquidators will be able to circulate forms for proofs of debt that will include the option for customers to elect to prove their claim” in The Bahamas.

FTX creditors will also receive the necessary waivers “barring” them from seeking to claim twice in both The Bahamas and Delaware. The 90-day timeline to hold a first creditors meeting started running from when Mr Simms and the PwC duo were approved as official liquidators in early November 2022.

“As such, there will be insufficient time to hold the first creditors meeting by February 8, 2024,” the senior Lennox Paton partner said. “The joint official liquidators therefore request an extension to February 29, 2024, to hold the first creditors meeting.

“As of January 9, 2024, the joint official liquidators have received a total of 60,933 notices of intention to file a claim through the creditor portal launched on

December 13, 2022. Given the time sensitivity of the instant application as set out above, and the amount of notice of intended claims lodged to-date, the joint official liquidators are unable to convene a meeting of creditors.”

This also extends to holding a vote on whether FTX Digital Markets creditors approve the deal with Mr Ray or the selection of a creditors’ committee. “The fact that the potential customers and creditors span the length and breadth of the globe creates further difficulties,” Mr Simms added.

The Lennox Paton senior partner also asserted that it “would be a herculean and nigh impossible task to reconstruct the books and records of FTX Digital Markets so as to identify with any accuracy” its assets and those of its customers given the extent to which they had been commingled with each other and other entities in the crypto exchange’s group.

Justifying the agreement to pool assets from the Bahamian and Delaware estates, Mr Simms said: “Pooling of assets will avoid costs and delay to the administration and distribution of the FTX Digital Markets estate in trying to untangle the assets and liabilities of the estates of FTX Digital Markets and the debtors - a task that might not even be possible.

“It is the joint official liquidators’ view that the affairs of FTX Digital Mar- kets and the debtors are so entangled and mixed up that a pooling of the assets of the respective estates with- out regard to ownership and enabling customers and creditors to elect to receive dividends in either The Bahamas or US is the most sensible and practical means to resolve the issues in dispute between the parties and maximise recoveries.”