The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s US chief last night moved to ratify the co-operation agreement thrashed out with the crypto exchange’s Bahamian joint provisional liquidators to end two months of bitter public clashes.

Attorneys representing John Ray filed legal documents with the Delaware Bankruptcy Court for a hearing on February 15, 2023, where Judge John Dorsey will be asked to approve the deal worked out with Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves.

“From the first days of these Chapter 11 cases, the debtors and the joint provisional liquidators have disputed certain facts, conclusions of law and jurisdictional matters concerning FTX Digital Markets,” Mr Ray and his team asserted in reference to the Bahamian subsidiary that is in provisional liquidation before the Supreme Court.

“Notwithstanding their continued dispute about these matters, the debtors and the joint provisional liquidators have worked constructively to develop a mutually acceptable path forward in the near term. On January 6, 2023, after substantial negotiation and discussions, the parties entered into the co-operation Agreement, which sets out a framework for co-operation and co-ordination of their activities as fiduciaries for the benefit of their respective creditors.

“On January 7, 2023, the debtors and the joint provisional liquidators filed with this court a notice of the entry into the co-operation agreement. The co-operation agreement will not become effective unless and until approved by this court and The Bahamas court.”

Tribune Business understands that the Bahamian provisional liquidators are in the process of making a similar application for recognition of the co-operation agreement by the Supreme Court. “The co-operation agreement reflects the parties’ agreement to proceed with parallel proceedings in this court and the Bahamas court, and to co-operate and co-ordinate in so far as possible to accomplish their common goals,” Mr Ray’s filings added.

These objectives were identified as “maximising recoveries to customers and creditors of each estate, avoiding redundant work, minimising expenses and respecting the sovereignty of the US and the Bahamian legal systems”. Mr Ray added: “The agreement is premised on the idea that the disputes between the debtors and the joint provisional liquidators may be best settled by the mutual sharing of information and arm’s-length negotiation in connection with a co-ordinated resolution of the Chapter 11 Cases and the Bahamian proceeding.

“The debtors and the joint provisional liquidators have agreed that one of the alternatives to consider jointly is the reorganisation of the FTX.com exchange, the international platform, to the extent such reorganization can be implemented in a manner that is in the best interests of both estates.

“Neither the debtors nor the joint provisional liquidators have made any commitment in connection with a potential reorganisation of the international exchange except for the general procedural undertakings reflected in the co-operation agreement.” Both sides, though, have “reserved” their rights to bring any dispute before the Supreme Court or Delaware Bankruptcy Court.

Tribune Business previously reported that the Bahamian provisional liquidators are to gain control of $46m in Tether stablecoins as part of the “co-operation” deal with Mr Ray, which is intended to create a “path forward” to resolve all remaining disputes. Tether is a stablecoin, with its value pegged one:one with the US dollar, thus making it a critical recovery source that can help finance the liquidation’s costs.

The agreement will also see the Bahamian trio “take the lead” in selling the $256.3m worth of high-end local real estate that FTX acquired prior to its spectacular implosion in early November 2022. They will be responsible for “arm’s length” marketing of these properties to potential buyers “utilising the services or one or more brokers”.

The deal stipulates: “The parties agree that the value in the properties owned by FTX Property Holdings will be realised over time in one or more arm’s length marketing processes utilising the services of one or more mutually acceptable brokers in a manner and on a timeframe designed to maximise the recovery.”

This, the agreement said, could be effected by a Supreme Court liquidation process running concurrently with the Chapter 11 proceedings or some other “mutually acceptable arrangement”. It added: “The joint provisional liquidators.... shall take the lead in managing the properties, determining the appropriate strategy for the monetisation of the properties, identifying buyers and conducting the marketing process.” This, though, all has to be approved by Mr Ray and his team.

Mr Simms, describing FTX Property Holdings as an International Business Company (IBC), said in previous court filings that its sole purpose had been to “purchase and hold properties on the island of New Providence in The Bahamas as offices for the benefit of FTX Digital Markets and dwellings for employees of FTX Digital Markets”.

He added: “FTX Property Holdings conducted no business other than the purchase and ownership of real property. Immediately following our appointment, the joint provisional liquidators began investigating all aspects of FTX Digital Markets’ business, including its business dealings with FTX Property Holdings. As part of this investigation, we have identified 35 properties owned by FTX Property Holdings, all located on the island of New Providence in The Bahamas.”

These included no less than 16 properties at Albany, 15 of which were condominiums, valued between $4.75m and $30m. A further seven units were acquired in the GoldWynn project at Goodman’s Bay, which is scheduled to open in early 2023, valued between $563,520 and $1.449m.

Another four units, varying in value from $975,000 to $1.54m, were purchased in the One Cable Beach project developed by Jason Kinsale’s Aristo Development. Some $26.34m was spent on acquiring multiple units at the Veridian Corporate Centre developed by Sebas Bastian, with further outlays of $17.435m, $9m and $1.8m on property at Ocean Terrace, Old Fort Bay and Pineapple House respectively.