The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX Bahamas’ liquidators and their US adversary yesterday suspended all scheduled legal filings as they bid to resolve their dispute outside the courtroom.

Documents filed with the Delaware Bankruptcy Court reiterated that FTX Digital Markets’ Bahamian provisional liquidators and John Ray, head of the crypto exchange’s 134 US entities presently in Chapter 11 bankruptcy protection, “are making progress” in efforts to reach a co-operation agreement and avoid further time-consuming and costly legal battles that only disadvantage the crypto exchange’s creditors.

“The parties are making progress on resolving this adversary proceeding and believe it is in their best interests to focus their attention on promptly concluding discussions and documenting any such resolution,” their joint legal filing yesterday confirmed.

As a result, both sides “agree to an abeyance of all deadlines” relating to upcoming legal filings so that they can have time and space to settle their differences away from the courts. This comes just days after Brian Simms KC, the Lennox Paton senior partner, and the PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves, informed creditors there was new resolution optimism.

Mr Ray and his team also likely need a settlement to progress their Chapter 11 reorganisation plan for FTX given that critical questions governing how the crypto exchange’s multi-jurisdiction liquidation will proceed have yet to be answered.

For example, it still has to be determined which assets and clients belong in which estate - the Bahamian liquidation, or the Chapter 11 proceedings in Delaware. Once that is worked out, it will then be necessary to decide which assets belong to creditors and which to the exchange. Thus far, 45,878 individuals, 958 institutions and 86 trade creditors have submitted a collective 46,922 claims against FTX Digital Markets.

Mr Simms and the PwC duo, in their last update to creditors in late October 2023, said: “The joint provisional liquidators have been engaged in adversary proceedings initiated by the Chapter 11 debtors and formal mediation.

“Outside of those proceedings, the joint provisional liquidators have also engaged in constructive informal discussions relating to the co-operation between the FTX Digital Markets estate and the Chapter 11 debtors. The return date for the court hearing has been rescheduled to enable sufficient time for those discussions to play out.”

The “adversary proceeding” is the legal action initiated by Mr Ray in Delaware in a bid to cut-off FTX Digital Markets and the Bahamian liquidators from securing any of the crypto exchange’s assets for their respective winding-up estate.

Answering the outstanding questions was why the Bahamian trio, in their first Supreme Court report, had recommended extending FTX Digital Markets’ liquidation by a further six months to August 2023. That has now morphed into a near nine-month extension.

That extension, Mr Simms and Messrs Cambridge and Greaves argued, would maintain value and “optionality” in FTX Digital Markets’ licence, which would be terminated if placed into full liquidation. And an extension would also allow them to “develop options to maximise returns to creditors via a platform reorganisation, which could include restarting the international platform in some format.

“The joint provisional liquidators are co-operating with the Chapter 11 debtors in this regard, but it is thought likely that it will take three to four months to agree a plan. That will then take time to implement.”

Lasting co-operation has proven elusive to-date, but the trio wrote at the time: “Ordinarily, it might be expected that a provisional liquidation outcome would be concluded within six months of a petition date.

“However, given the complexity of the case and the need to review and implement the matters outlined above, in addition to the value and volume of the likely creditor claims, the joint provisional liquidators’ recommendation to the Supreme Court is an extension of the provisional liquidation for a further six months in order to be able to determine and progress key matters.”