The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators are asserting that the document being cited as evidence of this country’s alleged collusion with Sam Bankman-Fried sparked the very court action that led to his removal.

Brian Simms KC, the Lennox Paton senior partner, and the PricewaterhouseCoopers (PwC) accountant duo of Kevin Cambridge and Peter Greaves, alleged in a January 2, 2023, filing with the Delaware Bankruptcy Court that the e-mail frequently referred to by FTX US chief, John Ray, was the final straw that prompted the Securities Commission to seek his ousting and their subsequent appointment.

Mr Ray and his team, appointed via the Chapter 11 bankruptcy process for some 134 FTX entities, have frequently cited Mr Bankman-Fried’s November 9, 2022, e-mail to Ryan Pinder KC, the attorney general, to suggest that the Government, Securities Commission and provisional liquidators were in cahoots with the indicted crypto exchange’s founder over the withdrawal of some $100m in digital assets paid out to 1,500 allegedly “Bahamian customers’.

The e-mail, which was also copied to Christina Rolle, the Securities Commission’s executive director, and Allyson Maynard-Gibson KC, the former attorney general who acted as FTX’s Bahamian attorney, said FTX had separated all Bahamian client assets from those of other customers and would give them preferential treatment by returning their funds.

“We are deeply grateful for what The Bahamas has done for us, and deeply committed to it. We are also deeply sorry about this mess,” Mr Bankman-Fried told Mr Pinder. “As part of this we have segregated funds for all Bahamian customers on FTX.

“And we would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole. It’s your call whether you want us to do this, but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. If we don’t hear back from you, we are going to go ahead and do it tomorrow.”

Mr Pinder told Tribune Business that “no authorisation was given by any party” to Mr Bankman-Fried to subsequently act as he promised, which resulted in the $100m payout over a 25.5 hour period between November 10-11. The payments violated asset freezes imposed by both the Bahamian Supreme Court and Delaware Chapter 11 court, and will likely be treated as fraudulent preferences subject to recovery and claw back in any winding-up.

The provisional liquidation trio, again pledging to pursue this $100m, blasted Mr Ray’s use of this e-mail to attack themselves, the Securities Commission and The Bahamas. “The Chapter 11 debtors have made a series of factual errors and erroneous allegations improperly attacking the Bahamian government, the Bahamian attorney general, the Commission, the Bahamian court and the joint provisional liquidators,” they asserted.

“Specifically, the debtors contend that the e-mail sent from Samuel Bankman-Fried to the Commission, in which Mr Bankman-Fried said he would open up withdrawals for all Bahamian customers on FTX’s exchanges, evidences their ‘close and frequent contact’.

“The chief executive officer of the Chapter 11 debtors went so far as to tell Congress that the e-mail evidenced ‘collusion’. The insinuation is that the Commission assisted Mr Bankman-Fried in the disposition of assets and therefore the joint provisional liquidators and FTX Digital should be stripped of their rights to access their own information. That allegation is untrue.”

Mr Simms and his colleagues continued: “That very e-mail referenced in the objection was the same e-mail that the Commission used as evidence to obtain authorisation to commence the Bahamian provisional liquidation in The Bahamas. In the declaration which has now been unsealed, the Commission stated that it ‘cannot condone the preferential treatment of any investor or client of FTX Digital or otherwise’ in the liquidation.

“The Commission has further clarified that ‘to the extent improper distributions were made to Bahamian citizens, such distributions will be subject to the appropriate claw back actions under the law’. Notwithstanding the Chapter 11 debtors’ incorrect aspersions, it is the goal, too, of the joint provisional liquidators to investigate and potentially claw back the alleged $100m in cryptocurrency withdrawals..... from 1,500 individuals.”

Ms Rolle, in her latest December 29, 2022, affidavit to the Supreme Court confirmed that Mr Bankman-Fried’s ‘Bahamian withdrawal’ pledge acted as the final trigger for his removal. “In light of the above mentioned e-mail, the Commission took immediate steps to remove the authority of Bankman-Fried and other directors to operate FTX Digital Markets by initiating proceedings before the Supreme Court as soon as possible for a provisional liquidator,” she added.

“The Commission did not condone or approve, either expressly, impliedly or otherwise, Bankman-Fried’s decision to ‘open up’ withdrawals for all Bahamian customers on FTX on the following day.”