The Tribune

• Ray dismisses ‘handshake deal’ with SBF

• Almost $1,000 for FTX chief’s ‘board games’

• US Justice Department makes forfeiture move

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s US chief yesterday branded a Bahamian entrepreneur’s bid to protect his rights over aircraft worth $28m as “nonsensical” and sought to dismiss his “oral ‘handshake deal’” with Sam Bankman-Fried.

John Ray, who controls the 134 FTX entities presently in Chapter 11 bankruptcy protection in Delaware, asserted in legal filings that efforts by Paul Aranha, founder of Trans-Island Airways, to ensure he is compensated for maintaining two planes acquired with funding from the imploded crypto exchange are “premature” and “unfounded”.

Revealing that almost $1,000 was spent on “board game purchases for SBF”, so that FTX’s founder could occupy himself while flying, Mr Ray also sought to turn the tables on Mr Aranha by alleging it is the Bahamian charter company owner who has been unreasonable over negotiations for the “most cost-effective path” to maximising the planes’ value for the benefit of the exchange’s investors and creditors.

However, the legal filings did not assert FTX Trading’s ownership of the two aircraft, with Mr Ray merely saying that estate will “seek to enforce their rights... at the appropriate time”. This came just hours after the US Justice Department, in its own submissions to the southern New York court where Mr Bankman-Fried is being tried, filed a “bill of particulars” for the forfeiture of the two planes as a means to help compensate FTX victims.

The Justice Department’s move likely means little in practice, given that Mr Aranha’s previously-filed court documents revealed he was in negotiations with the federal authorities to amicably resolve the fate of two planes and their ownership until Mr Ray intervened at the last minute to claim FTX Trading is the true owner.

The latter yesterday asserted that the US Justice Department will file its own objection to Mr Aranha’s action with the Delaware Bankruptcy Court on October 11 next week. The Bahamian aviation entrepreneur, arguing that he is having to “shoulder all of the risk and expense” in maintaining the planes, costing him $5.93m over the past two years, wants the court to give him security that he will be reimbursed by whoever is determined to own them.

His first, and likely preferred outcome, is for Judge John Dorsey to find that the two planes are owned by the Trans-Island Airways chief - not Mr Ray and FTX Trading’s estate - and order that the Chapter 11 asset freeze does not apply to them.

This would enable Mr Aranha to either sell or operate the planes, while also resolving any sums still owed to Mr Ray and FTX’s creditors/investors. Alternatively, should Judge Dorsey not issue such an Order, the Bahamian aviation entrepreneur is asking the Delaware Bankruptcy Court to still lift the Chapter 11 freeze so he can “use, operate, preserve and maintain” both planes or sell them should he so choose.

And, in a third and final option should Judge Dorsey not go for either at the upcoming October 19 hearing, Mr Aranha and his attorneys are seeking an Order that would enable him to impose liens on both planes such that Mr Ray would be forced to compensate him for both past and future maintenance costs incurred with their upkeep.

Mr Aranha could not be reached for comment prior to press time last night, but Mr Ray yesterday hit back by alleging that his action “is premature, unfounded and seeks relief to which the movants [the Trans-Island chief and his company] are not entitled”.

The FTX US chief also asserted that Mr Aranha’s claim to have incurred almost $6m in maintenance costs, which ultimately will inure to the benefit of the crypto exchange’s creditors and investors, is “based solely on unsupported and facially implausible statements” and should be rejected by the Delaware Bankruptcy Court.

“At its heart, this motion asks this court to issue an order finding that, although the FTX group and its employees selected the planes, paid every penny of the approximately $27.4m to acquire the planes, and paid Aranha millions more to make extensive renovations to the planes to fit their specific needs, the planes are actually owned entirely by the movants because Aranha purports to have reached an oral ‘handshake deal’ with Bankman-Fried to treat these tens of millions of dollars in transfers as an undocumented, unsecured, zero-interest loan to Aranha,” Mr Ray and his team alleged.

“The only ‘support’ that the movants provide is a declaration from Aranha attaching a handful of documents that are silent as to the core issues..... The debtors expect to establish at the appropriate time that the movants’ claims regarding the planes are nonsensical, internally inconsistent and thoroughly contradicted by the evidence.”

Mr Aranha described handshake and oral agreements as “not unusual” in his earlier filings, as other aircraft financing deals have been secured on such terms. The two planes involved are a Bombardier Global jet, acquired for for $15.9m, on March 2, 2022, followed by an Embraer Legacy on August 4, 2022, which cost a further $12.545m. The combined purchase price for both planes, just months before FTX’s collapse, was $28.445m.

Mr Ray yesterday alleged that FTX financed the aircraft acquisitions via Trans-Island Airways, while using its funds and those of Alameda Research, Mr Bankman-Fried’s private trading arm, “to obscure” the owner’s actual identity.

“In addition to selecting the planes and paying their entire purchase price, the FTX group also instructed Aranha to make extensive renovations to the planes to satisfy the whims of senior FTX group executives,” Mr Ray alleged.

“Between July and October 2022, Aranha invoiced the debtors more than $4m for purported upgrades to the planes and other related expenses including, among other things, nearly $1.3m for Wi-fi upgrades, approximately $900,000 for interior renovations and ‘aircraft bed systems, and $975 for ‘board game purchases for SBF for airplane’.”

The Embraer Legacy remains under Mr Aranha’s control in a hangar in Nassau, and Mr Ray yesterday alleged the Trans-Island owner is using this as “leverage” to ensure his demands are met. “The debtors’ first communications with the movants regarding the planes were in May 2023, months after the debtors had begun discussing the planes with the [US] government,” the FTX US chief claimed.

“The debtors have repeatedly urged the movants to agree to the most logical and cost-effective path forward, which is to co-operate with the [US] government to arrange for interlocutory sales of both planes, as doing so would allow the parties to address at the appropriate time any disputes as to their respective entitlement to the sale proceeds without the movants incurring further maintenance and storage costs.

“As to the Global currently in the [US] government’s possession, the movants have professed a willingness to agree to a sale, yet have for months sought to impose on the government and the debtors a shifting series of conditions with respect to the sale process and treatment of proceeds for any sale,” Mr Ray continued.

“As to the Legacy, the movants have flatly refused to commit to conducting a sale, instead using their current possession of the Legacy as leverage to try to force the debtors to grant the movants an unjustified windfall or to fund the Movants’ business operations.”

It is understood that Mr Aranha and his attorneys reject this interpretation of events, while holding the position that it is Mr Ray - rather than themselves - who has been intransigent and non-cooperative in resolving the planes’ fate.

Mr Ray, meanwhile, alleged that the Trans-Island Airways owner had failed to provide documentation to back his assertion that he is still owed $2.6m for aviation services provided to FTX. And he claimed that Mr Aranha had also failed to respond to requests to provide evidence supporting the near-$6m maintenance costs, although it is understood the Bahamian aviation entrepreneur’s position is that he has never been asked to provide it.

And, finally, Mr Ray also denied that he asked the Bahamian provisional liquidators for FTX Digital Markets to speak with Mr Aranha on his behalf regarding the aircraft.