The Tribune

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

The Supreme Court has approved FTX’s Bahamian subsidiary being placed into full judicial-supervised liquidation on the basis that it is just and equitable to do so.

Justice Loren Klein ruled on Friday that FTX Digital Markets should remain under the care of the provisional liquidators, whose status is now being elevated to official liquidators. No objections to the move were raised at the hearing.

Krystal Rolle KC, the Bahamian attorney for jailed FTX founder, Sam Bankman-Fried did not file a notice of intention or appear at the hearing as she did not receive instructions to appear on his behalf.

FTX’s founder had previously said he “wishes to be heard” at the Supreme Court hearing on the winding-up petition despite inhabiting a New York jail cell after a jury found him guilty on all seven fraud and other criminal counts.

But Krystal Rolle, in her letter to Robert Adams KC, the Delaney Partners attorney representing the Securities Commission, said: “We hereby give notice that Mr Bankman-Fried wishes to be heard on the winding-up petition. However, as you can well imagine, our ability to obtain instructions from Mr Bankman-Fried has its challenges by reason of his incarceration.

“As such we are unable to confirm that we will be sufficiently instructed to make such representations on November 10, 2023. We must therefore foreshadow that we may require additional time for this purpose. In any event, we are endeavouring to obtain Mr Bankman-Fried’s further instructions and shall provide further confirmation as soon as our instructions in this regard are solidified.”

Mr Adams KC, representing the Securities Commission, noted that Christina Rolle, the regulator’s executive director, in an affidavit filed the previous day included a resolution that removed Mr Bankman-Fried and Ryan Salame as directors of FTX Digital Markets.

They have now been replaced with the former Bahamian provisional liquidators for FTX Digital Markets, who are Brian Simms KC, the Lennox Paton senior partner, and the PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves. All three are now the official liquidators.

Christina Rolle previously backed the trio’s appointment as full liquidators on the basis that each has “gained knowledge” of FTX Digital Markets’ operations over the past year.

“In addition, on behalf of FTX Digital Markets, the joint provisional liquidators are engaged in legal proceedings before the Bankruptcy Court in Delaware, US, and time sensitive negotiations to fully resolve such proceedings and promote the harmonious administration of the insolvent estate of FTX Digital Markets and other entities in the FTX group of companies,” she said.

“Considerable time and expense would be required for new individuals to acquire such knowledge and understanding to effectively act in place of Messrs Simms, Cambridge and Greaves to the detriment of the creditors and customers of FTX Digital Markets. Such likely time and expense would be contrary to the interest of the creditors and customers of FTX Digital Markets and the public.”

Christina Rolle was present during the proceedings and took the stand to verify the contents of her affidavits submitted in relation to the case.

Peter Maynard & Company, the Bahamian attorneys for John Ray, the FTX US chief who has control of some 134 FTX entities in Chapter 11 bankruptcy protection in the US, supported the winding-up petition.

Justice Klein ruled that FTX should be wound up for violation of section 24 of the Digital Assets and Registered Exchanges (DARE) Act, which speaks to a duty of digital asset providers to maintain professional conduct.

FTX Bahamas’ now-former provisional liquidators and their US adversary last week suspended all scheduled legal filings as they bid to resolve their dispute outside the courtroom.

Documents filed with the Delaware Bankruptcy Court reiterated that the FTX Digital Markets trio and Mr Ray “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 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. 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.