The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian aviation entrepreneur and his firm fulfilled their $2m deal with the US Justice Department and FTX’s US chief by handing over the crypto exchange’s second jet within three days of settlement.

Documents accompanying FTX’s Chapter 11 reorganisation plan, unveiled by John Ray in his capacity as head of 134 entities in bankruptcy protection in Delaware, reveal that Paul Aranha, founder of Trans-Island Airways, flew the Embraer Legacy to the US and handed it over to Justice Department representatives just 72 hours after the parties’ settlement was approved by the southern New York federal court.

“The debtors have co-ordinated closely with the Department of Justice in connection with the seizure and forfeiture of Bombardier Global and Embraer Legacy airplanes, which were purchased and improved with approximately $35m of estate funds,” Mr Ray’s filings disclosed.

“On March 22, 2024, the debtors, the Department of Justice and Paul Aranha, who had claimed he owned the airplanes, submitted a stipulation for approval of the US District Court in the southern district of New York pursuant to which Aranha would return the Embraer Legacy to the Department of Justice and the US marshals would sell both planes.

“The Bankruptcy Court entered that stipulation on March 22, 2024, and Aranha returned the Embraer Legacy to the Department of Justice on March 25, 2024.” Mr Aranha, in a brief statement yesterday, said: “We just honoured our agreement and are happy to see it come to an end.

“I hope they [Mr Ray and his team] get support for the reorganisation plan they put together. As a customer we will be voting in favour of it.” Mr Aranha previously described himself as “one of the largest Bahamian victims” of the crypto exchange’s implosion - a reference to the fact that $11m related to repayment of the loan taken out to purchase the two planes was in a “customer account” when FTX collapsed.

The settlement, which was seen by this newspaper, stipulated that Mr Aranha and another of his companies, Island Air Capital, were to be paid $1.8m to cover “reasonable costs” they incurred in maintaining the 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, the Embraer Legacy, had remained in Nassau under the control of Mr Aranha and his companies. As part of the deal, he had 30 days - until April 21, 2024 - to fly the plane to Fort Lauderdale and hand it over to the US federal authorities. In return for beating this deadline by four weeks, 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.

Meanwhile, the Bahamian liquidators for FTX Digital Markets are also supporting a Chapter 11 reorganisation plan that will see the crypto exchange’s creditors and investors recover more than they are owed. “

“The plan does more than return petition date value to creditors: It includes potential incremental recoveries to compensate creditors for the time value of their money trapped at the FTX group since the petition date [November 11, 2022]. Indeed, the debtors currently forecast that customers and digital asset loan creditors will recover between 118 percent and 142% percent of their petition date claim values,” Mr Ray revealed.

“The monetisation effort has been successful and the debtors currently expect to have approximately $12.8bn in cash as of the expected effective date of the plan, enough to pay all non-governmental customers and creditors in full based on the petition date value of their claims, subject to the conditions and assumptions described in this disclosure statement.

“Now that the debtors have reached a situation where projected cash covers all non-governmental creditor claims, the debtors intend to continue to gradually monetise their remaining assets in order to maximise the amount available for payment of supplemental amounts to creditors.

“The debtors anticipate reducing all of these assets to cash opportunistically based on market prices and the timing of distributions, and certain assets may not be sold immediately but held for sale for some reasonable period of time based on the nature of the asset and market conditions.”