The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX's Bahamian liquidators prevented a near-$8m loss by completing the acquisition of eight condo units in the GoldWynn development at Goodman's Bay, it has been revealed.

Brian Simms KC, the Lennox Paton senior partner, in a January 12, 2024, affidavit supporting the bid for Supreme Court approval of the settlement with their US adversary, revealed that failing to close purchases agreed prior to the crypto exchange's November 2022 implosion would have cost FTX creditors and investors some $7.718m.

The closing of these transactions, which the Bahamian liquidators for FTX Digital Markets will now also seek Supreme Court approval for, means all eight units will be included among the properties that they will seek to sell under the terms of their deal with John Ray, head of the 134 entities in Chapter 11 bankruptcy protection in Delaware.

The sales proceeds will then be used to reimburse victims of the crypto exchange's collapse, and Mr Simms voiced optimism that FTX Digital Markets' claim for $256m against the 41 Bahamian properties "will be satisfied to a great extent" from these disposals. Mr Ray had previously suggested that the sell-off "will not be sufficient” to satisfy the Bahamian subsidiary's demands.

Meanwhile, Mr Simms revealed that he and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, have "indemnified" Wynn Development, as GoldWynn's developer, against any costs or damages it may incur should a former FTX Digital Markets executive seek to challenge the seizure and sale of one particular condo whose purchase was put in their personal name.

The Lennox Paton senior partner disclosed that the Bahamian liquidator trio acted after Wynn Development's attorney, Alistair Chisnell of Graham, Thompson & Company, served them on December 5, 2023, with a "notice to complete" the eight condo transactions for which sales agreements were signed on February 22, 2022, and March 4, 2022.

Seven units were to be acquired by FTX Property Holdings (PropCo), the vehicle used by the crypto exchange to make its Bahamian real estate buys, with the remaining condo's purchaser named as Weiyi Xia, an FTX Digital Markets employee.

Deposits and stage payments, ranging from $507,168 to $1.305m, had been made on all eight condos when the "notice to complete" was served, and failing to close would have placed this collective near-$8m sum in jeopardy of being lost as a recovery source for FTX creditors and investors.

"The joint official liquidators and debtors [Mr Ray] were keen to avoid the forfeiture of the sums paid towards the purchase of the units - the sum of $7.718m," Mr Simms said. To close the deals, FTX Digital Markets and FTX Property Holdings agreed a deed of assignment on December 19, 2023, whereby the latter - which is under Mr Ray's control - assigned all the sales agreements to the Bahamian subsidiary.

It was thus FTX Digital Markets that completed the GoldWynn purchases, and Mr Simms added: "The PropCo GoldWynn units have since been conveyed to FTX Digital Markets, which FTX Digital Markets acting through the joint official liquidators holds in accordance with the deed of assignment and declaration of trust dated December 19, 2023."

This will allow the Bahamian liquidators and their agents to sell the GoldWynn units under the terms of the agreement struck with Mr Ray that now awaits approval from both the Supreme Court and Delaware Bankruptcy Court. A separate approval will also be sought from the Supreme Court for the GoldWynn transactions, with hearings on these matters likely to take place next week.

As for the unit that was to be acquired by Weiyi Xia, Mr Simms asserted there was evidence that the $1.1m deposit and stage payments were paid by FTX Digital Markets and thus should be recovered by the latter for the benefit of creditors and investors. However, Wynn Development had sought protection against any legal claim by the former FTX employee.

"It was necessary for FTX Digital Markets to execute the indemnity agreement as a condition of Wynn Development completing the sale of the Xia GoldWynn unit," Mr Simms explained. "Wynn Development wished to be indemnified from any adverse costs, damages or expenses that may be incurred in the event that proceedings are commenced by Weiyi Xia as a result of the sale and purchase and completion of the GoldWynn unit to FTX Digital Markets.

"In summary, the joint official liquidators caused FTX Digital Markets to execute the indemnity agreement on the basis that, among other things, FTX Digital Markets may have a proprietary traceable interest in the Xia GoldWynn unit in that FTX Digital Markets made payments on behalf of Weiyi Xia in the amount of $1.1m to Wynn Development.

"The books and records of FTX Digital Markets show that FTX Digital Markets provided the funding for the installment payments for the Xia GoldWynn unit similar to the other properties purchased in The Bahamas by PropCo and/or other employees of FTX Digital Markets," the Lennox Paton senior partner added.

"If Weiyi Xia does seek to challenge the conveyance to FTX Digital Markets of the Xia GoldWynn unit, FTX Digital Markets will wish to protect the funds paid by FTX Digital Markets and resist the challenge. If Wynn Development was drawn into the dispute, it wanted to make sure that it was indemnified for any costs."

Under the terms of their overall settlement, Mr Ray and the Bahamian liquidators have entered into “The Bahamas’ properties exclusive sales agency agreement” that has to be approved by both the Supreme Court and Delaware Bankruptcy Court.

Mr Simms asserted that the agreement "is advantageous for FTX Digital Markets because it gives control of marketing and sales of PropCo's properties to the joint official liquidators, who have a greater familiarity with the real estate market in The Bahamas than the debtors.

"Further, as the global sales agreement provides for FTX Digital Markets to be paid in excess of $256m from the sales of PropCo's properties, it is reassuring that FTX Digital Markets has a large measure of control over the way the properties are marketed and the selling prices".

With all FTX's Bahamas property purchases financed by the local subsidiary, Mr Simms added: "The liquidators took steps to preserve and protect the properties as relevant by way of insurance renewals, repairs and liaising with One Cable Beach to place four properties into the rental pool to cover ongoing holding costs...

"These costs, to-date, have been met at the expense of FTX Digital Markets' estate...on the basis that FTX Digital Markets is expected to be indemnified out of the sales proceeds." He said the settlement with Mr Ray avoids "what would otherwise have been protracted legal argument over the ownership and liabilities associated with the 41 properties".

"The properties will be sold - subject to the approval of both courts - promptly in The Bahamas for the ultimate benefit of the respective estates. It is expected that the claim of FTX Digital Markets for approximately $256m will be satisfied to a great extent from the sake of these properties," Mr Simms said.

"Again, this will hopefully facilitate the prospect of an early distribution which would not have been likely or feasible without the global sales agreement." The deal involves PropCo appointing FTX Digital Markets, and the Bahamian liquidators, as its “exclusive agent with powers to conduct the management, preparation for sale, marketing and sale of The Bahamas properties”.

The trio will have “the full exclusive powers, as the agent of FTX PropCo, to appoint and engage real estate agents to market The Bahamas’ properties for sale; elicit or encourage expressions of interest or bids for the disposition of The Bahamas’ properties; and conduct negotiations with any potential purchaser or other interested person for any disposition of The Bahamas’ properties”.

However, FTX PropCo, which is under Mr Ray’s control, “has the sole and exclusive right to” approve both the disposition of one of the 35 properties or entering into a sales agreement for any of them. Without its approval, any sale will be “null and void”.

And, while FTX Digital Markets can recommend a sale and enter into a binding agreement for such a deal, it must back this up by giving Mr Ray “all offers received by the liquidator; a broker price opinion including a comparative property sale analysis produced by a well-respected real estate broker; (any valuation reports available to the liquidators; and any other information or documentation that FTX PropCo may reasonably request”.