The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian aviation entrepreneur and his firm have secured a $2m settlement with the US Justice Department and FTX's US chief to resolve the fate of the crypto exchange's two aircraft.

Paul Aranha, founder of Trans-Island Airways, told Tribune Business that the deal - which on Friday was approved by the southern New York district court - leaves him "one step closer to putting the FTX era behind me" following 14 months of negotiations with US government prosecutors and John Ray, head of the 134 entities presently in Chapter 11 bankruptcy protection.

The agreement, which has been seen by this newspaper, stipulates that Mr Aranha and another of his companies, Island Air Capital, are to be paid $1.8m to cover "reasonable costs" they incurred in maintaining two aircraft valued at a combined $28m when they were purchased with financing provided by FTX just months before its November 2022 collapse.

The $1.8m is to be paid from the proceeds generated when the planes are auctioned off by the US government in a bid to raise monies that will be used to compensate FTX victims. One of the aircraft, a Bombardier Global jet, was previously seized by the US authorities and is now in their custody.

The other, an Embraer Legacy, has remained in Nassau under the control of Mr Aranha and his companies. As part of the deal, he now has 30 days - until around April 21, 2024 - to fly the plane to Fort Lauderdale and hand it over to the US federal authorities. In return for doing so, he will receive a further $183,000 to cover all expenses associated with handing over the plane, taking total compensation to $2m.

Mr Aranha and his companies have also agreed to withdraw, and not pursue, litigation they launched against Mr Ray and FTX's US estate in September 2023 which sought an order from the Delaware Bankruptcy Court that the automatic asset freeze imposed by the Chapter 11 proceedings be lifted and not apply to the two aircraft.

Sam Bankman-Fried, FTX's fraud convicted founder, was said by US prosecutors not to have objected to the agreement while the deal has also been signed-off by Ryan Salame, the former head of the crypto exchange's Bahamian subsidiary, FTX Digital Markets.

Mr Aranha, in a statement responding to Tribune Business inquiries, said: "I am pleased to have reached an agreement with the US government and the FTX estate to compensate me for care of the planes after FTX’s collapse, and to do so out of the proceeds from selling the planes.

"We advocated from the earliest moment that selling the planes would preserve value to help compensate FTX’s victims, of which I am also one. For 14 months I have worked hard to reach this result with institutions and entities that have far greater resources at their disposal than me.

"I am gratified that this phase of the process has been resolved and that I am one step closer to putting the FTX era behind me. I am grateful for my legal team, led by Sharon Frase, for their tireless representation." He declined to comment further.

Damian Williams, the US attorney for southern New York, who led the criminal probe into FTX's collapse and prosecution of Mr Bankman-Fried, also confirmed the agreement with Mr Aranha and his companies in a Friday filing with the federal court.

"The stipulation and order represents an agreement between the government; Island Air Capital, Capital Peak Aviation, and Paul Aranha, who currently possess one of the planes, an Embraer Legacy, in The Bahamas; the FTX debtors; and Ryan Salame," Mr Williams and his team affirmed.

"Under the primary terms of the stipulation and order, Island Air Capital agrees to withdraw litigation previously filed against the FTX debtors; agrees to fly the Legacy to the US and surrender the plane to the custody of the government; and the government agrees to pay Island Air Capital reasonable costs for its maintenance of the two airplanes before they were seized by the government and for costs associated with transporting the Legacy to the US."

Mr Aranha, in previous legal filings, asserted that he and his companies had incurred $5.93m in expenses associated with ensuring the planes' upkeep over the past two years so the settlement effectively means he will recover around one-third of this sum.

The agreement stipulates that he will deliver the Legacy to US authorities by flying it from The Bahamas to Fort Lauderdale Executive Airport or, should "aircraft performance limitations arise after take-off", Fort Lauderdale Hollywood International Airport. The hand over is to take place within 30 days of the March 22 agreement unless mechanical, weather or other unforeseen problems intervene.

Mr Aranha, as at March 11, 2024, had estimated that he and his companies will incur $183,000 "in reasonable costs for delivery" of the Legacy by March 30, including fuel, insurance, airport taxes and fees plats their daily contract expenses and return flights. The US government has agreed to reimburse this sum from the sales proceeds, plus any higher figure if this is proven to have been incurred.

"As part of the delivery process, Island Air Capital will take all necessary steps to deregister the Legacy from the Bahamian civil aircraft register, transfer the de-registration to the US and provide a copy of the Bahamian-issued de-registration certificate to the US Marshall's Service," the agreement stipulates.

"Further, Island Air Capital, Capital Peak and/or Paul Aranha will take such steps as are necessary to delist Island Air Capital, Capital Peak and/or Aranha from any publicly available online databases as the contacts for the Legacy and the Global 5000."

As for overall compensation, the agreement stipulates: "The parties agree that Island Air Capital has incurred reasonable costs in the maintenance and upkeep for the subject properties from November 11, 2022. up to the present not to exceed $1.8m. The parties agree that Island Air Capital should be compensated for such costs." This sum is to be paid from the proceeds generated by selling the two aircraft.

Mr Aranha had acquired both planes, with the Bombardier Global costing $15.9m and the Embraer Legacy a further $12.545m, on March 2, 2022 and August 4, 2022, respectively using financing provided by FTX. Both aircraft were to provide aviation services to the crypto exchange and Bankman-Fried, but were never used because they were still in the process of being upgraded when FTX collapsed.

The aviation entrepreneur, who founded Trans-Island Airways as a Bahamian charter company, along with Island Air Capital, began his relationship with FTX when he "started flying Sam Bankman-Fried.... to and from The Bahamas in 2021" after the crypto exchange relocated to this nation from Hong Kong.

"From approximately October 2021, Trans-Island Airways provided more than $15m worth of private charter and cargo flights, customised plane upgrades and other services to Sam Bankman-Fried and other FTX executives, employees, business associates, guests, family and friends," Mr Aranha and his companies said in their Delaware action, which they have now agreed to dismiss.

"By January 2022, the volume of the flight services that Trans-Island Airways was providing to FTX required additional planes. FTX did not wish to own planes, and Trans-Island Airways' business model supported the acquisition of additional aircraft, so FTX agreed with Mr Aranha that he would purchase the planes.

"FTX would finance the purchase of those planes with an unsecured, no-interest loan, to which Sam Bankman-Fried agreed in a handshake deal with Mr Aranha." The then-FTX chief suggested the loans be repaid via an account opened in Trans-Island Airways chief's name with the crypto exchange.

Besides funds deposited by Mr Aranha personally, FTX would also pay into the account the sums charged by Trans-Island for flight services provided to the crypto exchange. These sums, plus any trading gains, would be applied to pay down the loan. Mr Aranha agreed to the deal, especially since any trading losses would only extend the time for repayment.

"In early November 2022, FTX’s financial problems came to light. Mr Aranha was warned to withdraw his funds from FTX, and he had multiple opportunities to do so before FTX suspended activity in his account. He did not because he was committed to repay the aircraft loan to FTX," the lawsuit asserted.

"As of the petition date, approximately $11m toward repayment of the aircraft loan was on deposit in the customer account. Additionally, as of the petition date, the debtors owed Trans-Island Airways approximately $2.6m for unpaid flight services, bringing the balance of the aircraft loan to $14.845m, down from $28.445m within only eight months."

The $11m in the "customer account" was broken down into $6.339m worth of stablecoins; $4.566m in fiat currency; and $83,665 worth of Bitcoin. "Based on information and belief, Mr Aranha is one of the largest Bahamian victims of Sam Bankman-Fried's crypto currency fraud," the legal filings alleged.