The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE peace deal between FTX’s Bahamian liquidators and their former US adversary has been approved by both the Supreme Court and Delaware Bankruptcy Court, it has been revealed.

Judge John Dorsey yesterday signed an Order, seen by Tribune Business, approving the terms of the global settlement agreement between Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, in their capacities as FTX Digital Markets liquidators and John Ray.

This newspaper also understands that Justice Loren Klein gave the Supreme Court’s consent to the deal at a hearing on Monday, thus paving the way for the Bahamian trio to co-operate with Mr Ray, who heads the 134 FTX entities in Chapter 11 bankruptcy protection in Delaware, on adjudicating creditor claims and returning assets to investors.

The settlement deal’s implementation hinged on obtaining approval from both courts. Among the first moves triggered by these developments will be Mr Ray’s provision of a $45m bridging loan, carrying a 7 percent per annum interest

rate, “no later than January 29, 2024” to the Bahamian liquidators.

The proceeds are to be used “solely to pay administrative expenses” incurred in the FTX Digital Markets liquidation, with this sum to be repaid on June 19, 2025, or earlier if milestones such as approval of the Chapter 11 re-organisation plan occur beforehand. Proceeds from “recovery of certain assets” will also be set aside by the Bahamian liquidators to repay the bridging loan.

This financing will give FTX Digital Markets trio much-needed cash with which to finance their work after being starved of funds by the US Justice Department’s seizure of some $143m from the Bahamian subsidiary’s US bank accounts.

Both sides, as part of their deal, have agreed to use best efforts to employ similar asset valuations and settlement offers when assessing/granting creditor claims in their respective liquidation proceedings. And the Bahamian trio will “take the operational lead in managing the value-maximising disposition of real estate and other assets in The Bahamas”.

They will also spearhead “pursuing specific litigation and avoidance actions identified in the global settlement agreement as part of the ongoing efforts to maximise recoveries for customers and creditors”, which seems to imply Mr Simms and the PwC duo will be in charge of efforts to recover the $100m obtained by 1,500 “Bahamian” customers in violation of the asset freeze when FTX imploded.

FTX’s Bahamian liquidators previously asserted that the settlement with their US adversary “represents the best deal” possible given that lengthy legal battles would slash creditor recoveries “possibly to extinction”.

Mr Simms, in a January 12, 2024, affidavit filed with the Supreme Court alleged it is “extremely unlikely that more favourable terms could be achieved” with John Ray given that the Bahamian liquidation is in a “much weaker financial position” than their Chapter 11 counterpart.

While he and his fellow FTX Digital Markets liquidators have “repeatedly pushed back” against “unacceptable” offers by the FTX US chief, Mr Simms signalled that “limited assets” presently available to the trio would be exhausted by continuing their courtroom fight “with no end in sight”.

With the Bahamian trio controlling just 30 percent of the local subsidiary’s cash assets, due in large measure to the US Justice Department’s seizure of $143.2m from its US accounts in late 2022, the Lennox Paton senior partner conceded that assets available to pay creditors would ultimately be exhausted by the legal sparring and they would have to seek litigation financing that comes with its own risks.

And customer and FTX group assets and liabilities are “so commingled” and “inextricably intertwined that it would be practically impossible”, in addition to creating enormous delays and costs, to try and “unravel” what belongs to which liquidation estate - The Bahamas or Delaware.

Detailing the commercial rationale that drove the FTX Digital Markets liquidators to settle with Mr Ray, who heads the 134 FTX entities currently in Chapter 11 bankruptcy protection in Delaware, Mr Simms nevertheless hailed what he described as a “land-mark deal” that will speed up asset recoveries for the near-61,000 creditors who have filed claims against The Bahamas’ estate.

“In the joint official liquidators’ considered view, the global settlement agreement is a landmark deal which will pave the way for the return to customers of the proceeds from assets

recovered for the insolvent estates much earlier than otherwise would have been the case,” Mr Simms alleged in his affidavit, filed in support of the liquidators’ bid for Supreme Court approval of their deal with Mr Ray.

“Absent the global settlement agreement, it is unlikely that recoveries after the costs of necessary legal actions would have been sufficient to make any distribution of any significance to customers and creditors of FTX Digital Markets.

“The global settlement agreement addresses many of the complex cross-border legal issues and other issues raised following the collapse of the FTX group. It provides for assets across the estates of FTX Digital Markets and the debtors to be pooled for distribution to FTX.com customers in a way that ensures customers” gain “substantially identical recoveries” whether they claim in The Bahamas or Delaware.