The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s US chief has admitted his attacks on The Bahamas’ integrity were “misguided” by agreeing to work with the failed crypto exchange’s local liquidators, the Attorney General argued last night.

Ryan Pinder KC, speaking after John Ray put his name to a statement vindicating the Securities Commission’s actions in protecting assets belonging to clients of FTX’s Bahamian subsidiary, told Tribune Business this was further evidence that the regulator had undertaken “proper, lawful and responsible” measures.

“The negative comments about the jurisdiction from the Chapter 11 debtors were always false, misguided and aimed to discredit our jurisdiction,” Mr Pinder said, referring to Mr Ray and his team. “With or without a co-operation agreement, that type of action was never warranted, and clearly even the Chapter 11 debtors recognise [it was] misguided.”

His comments come after Mr Ray, who has oversight of 134 FTX-related entities under Chapter 11 protection in the federal bankruptcy court in Delaware, on Friday signed a “settlement and co-operation agreement” that will result in his team work co-operatively together with the Bahamian provisional liquidation trio who have responsibility for FTX Digital Markets, the collapsed crypto exchange’s local subsidiary.

The terms the deal, which was filed with the Delaware bankruptcy court over the weekend, will see “parallel proceedings” related to FTX’s insolvency continue before both the Delaware court and Bahamian Supreme Court. Mr Ray and his team will “co-ordinate” these in conjunction with the Bahamian provisional liquidators, Brian Simms KC, the Lennox Paton senior partner, and PricewatehouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves.

Unveiling their agreement, both Mr Ray and the joint provisional liquidators pledged to work together to verify and value the digital assets the Securities Commission transferred to its protection on November 12, 2022, for safe-keeping amid fears FTX was being hacked and these could be lost and/or stolen.

FTX’s US chief had spent the previous months attacking this transfer, alleging that it showed there was “collusion” between the Securities Commission, Bahamian government and joint provisional liquidators and the failed crypto exchange’s co-founders, Sam Bankman-Fried and Gary Wang. He also claimed that it violated the ‘asset freeze’ imposed by the Delaware court due to the start of Chapter 11 proceedings.

However, the joint statement to which Mr Ray put his name on Friday was markedly different in both content and tone. “The parties are each comfortable the digital assets have been appropriately safeguarded by the Securities Commission as restructuring discussions continue,” the co-operation deal announced.

The comments effectively vindicate the Securities Commission’s move, and Mr Pinder said: “The Securities Commission and the Government have always thought and believed the conduct of the Securities Commission was lawful, warranted and in the best interest of creditors and clients in preserving FTX assets. 

“It was proper and timely regulatory enforcement action. The recent acknowledgement by the Chapter 11 debtors is evidence of the proper, lawful and responsible action of the Securities Commission of The Bahamas.” He added that cross-border co-operation between liquidators in different jurisdictions was vital to maximising asset recoveries for investors in multi-billion dollar international insolvencies such as FTX’s.

“In cross-border insolvency matters it is always expected and beneficial to have co-operation between the respective administrators/liquidators in each jurisdiction,” Mr Pinder told this newspaper. “As I understand it the joint provisional liquidators were always willing and looking to have co-operation so that they can have access to the necessary information to properly do their job and protect the interests of clients and investors of FTX Digital Markets.”

The agreement between Mr Ray and Bahamian provisional liquidators seemingly means that peace has finally arrived in the FTX liquidation following a near two-month battle. The crypto exchange’s US chief and his attorneys publicly asserted they did not trust the Bahamian government and regulators, including before the US Congress, which threatened to sully and damage The Bahamas’ reputation as an international business centre that upholds the rule of law.

These attacks should now cease as a result of Friday’s deal, which is understood to have been thrashed out over several days of intense negotiations last week between Mr Ray and the Bahamian provisional liquidators, together with their respective advisers. Their two-month battle is understood to have been a major distraction for both sides, especially over the last three to four weeks as the acrimony and accusations heated up.

The deal will enable both sides to focus on their core mandates, which is to identify, trace, secure and protect all FTX assets for the benefit of the failed crypto exchange’s clients, while also avoiding potentially time-consuming and costly court battles that will only serve to undermine recovery efforts.

It is unclear, though, whether the FTX implosion and Mr Ray’s attacks will have any long-lasting impact on The Bahamas’ brand and reputation. Kwasi Thompson, the Opposition’s finance spokesman, last night urged the Government to move rapidly to repair any damage.

Hailing the co-operation agreement between Mr Ray and the joint provisional liquidators as “a very important step forward”, the east Grand Bahama MP said: “The Bahamas continues to be a well-regulated country and Bahamians remain some of the most talented in the world. While there remains many questions to be answered by the Government, this is a step in the right direction to bring resolution on this entire matter.

“The Government also has much work to do in restoring the reputational damage this fiasco has caused, and their inaction has only made it worse.” The Davis administration has largely let the Securities Commission take the public lead in responding to Mr Ray’s attacks.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, yesterday hailed the co-operation agreement as “a major first step towards getting things back in order”. He suggested the public battle, and attacks on The Bahamas, stemmed largely from Mr Ray and his team seeking to control FTX’s liquidation, restructuring and sell-off and ensure Delaware remained the prime location for this.

“The co-operation between liquidators makes sense and hopefully this will be resolved as soon as possible so people don’t think of this [FTX] being the dominant theme when they think of The Bahamas,” Mr Aubry said. “Hopefully the co-operation becomes the dominant process and we get away from the media back and forth that we’ve seen.

“The fact they’ve come to a resolution would reflect that a lot of what we saw in the newspapers was a lot of the positioning of my side versus your side, but the by-product is potentially damaging to the reputation of The Bahamas as a place that operates at a high level,” he added.

“What we’re trying to do as a country is move forward and focus on attracting responsible foreign direct investment. A lot of the strategy in building sustainable development is enticing responsible foreign direct investment, making this a place attractive to those persons wanting to do business in a place based on laws and regulations as opposed to wanting to get around the system.

“We want to show persons this is a place to succeed, and bring their best products, ideas and technology. We need to reinforce our reputation for that. Birds of a feather flock together.”