The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamas chief used $2.5m allegedly “misappropriated” from the crypto currency exchange to finance his acquisition of a 40 percent ownership stake in a well-known New Providence restaurant.

Details of the investment in Prime One, the steakhouse and seafood eatery located on Windsor Field Road, by Ryan Salame were disclosed in a recently-filed lawsuit by John Ray, who continues to head the 134 FTX entities still in Chapter 11 bankruptcy protection in the US.

The $2.5m outlay is a relatively small part of $98.8m in assets purportedly “looted” by Mr Salame, the now-jailed head of FTX Digital Markets, the crypto exchange’s Bahamian subsidiary, which Mr Ray is now seeking to recover for the benefit of clients and creditors.

The Chapter 11 chief, asserting that Mr Salame used these funds in part to finance business ventures and acquire high-end real estate, alleged: “In December 2021, Salame invested a further $2.5m to acquire a 40 percent ownership interest in JBK International Ltd, which operates a steakhouse in The Bahamas called Prime One, located at Windsor Field Road, Nassau.”

No further details were provided, and Tribune Business efforts to reach out to Prime One’s principals prior to press time proved fruitless. There is no indication, though, that they, the restaurant or its employees were aware of the source of Mr Salame’s funds or that they have done anything wrong in relation to FTX and its collapse.

It is unclear whether, and how, Mr Ray may seek to recover the $2.5m invested in Prime One by Mr Salame. To do so, he would likely have to come to The Bahamas and file an action before the Supreme Court, although one option may be that the Bahamian liquidators for FTX Digital Markets could act as his agents in any attempted asset recovery.

Meanwhile, Mr Ray’s November 4, 2024, lawsuit against Mr Salame also contains allegations that the former FTX Bahamas head breached the US Foreign Corrupt Practices Act (FCPA) by paying bribes to unidentified Bahamian Immigration officials to facilitate the entry of the crypto exchange’s employees into this nation.

These claims are contained in a US Department of Justice e-mail, referenced by the Chapter 11 chief, which details discussions between US prosecutors and Mr Salame’s attorneys. Referring to “new areas of criminal exposure”, the e-mail details “evidence that Salame was involved in FCPA scheme in The Bahamas, in which he supervised efforts to pay bribes to immigration authorities to help get FTX employees and associates into the country”.

No specifics on the Immigration-related allegations are provided. But there is also an intriguing reference to trial evidence involving FTX’s now-jailed founder, Sam Bankman-Fried, “who joked that Ryan Salame . . . was effectively a member of the Bahamian government’ when discussing who FTX should approach to discuss a partnership opportunity between the crypto and the Bahamian government”.

Mr Ray, meanwhile, is alleging that FTX’s Bahamian subsidiary entered “a sham professional services agreement” with Michelle Bond, Mr Salame’s now-wife, who mounted an unsuccessful 2022 campaign to be elected to the US congress that was financed with money provided by the crypto exchange and its clients.

Asserting that Ms Bond never performed any work under this agreement, the Chapter 11 chief claimed that some $400,000 was nevertheless transferred from FTX Digital Markets’ account with Fidelity Bank (Bahamas) in summer 2022 to her personal bank account. These funds were then used to finance her congressional push - a move alleged to violate the US Foreign Corrupt Practices Act. 

“Not content with the legal maximum, Salame conspired with Bond to cause unlawful donations to be made to the Bond campaign, which were funded with additional misappropriated debtor assets,” Mr Ray is alleging.

“For example, on or about May 27, 2022, Salame arranged for FTX Digital Markets to enter into a sham professional services agreement with Bond, which provided for a $400,000 sign on bonus to Bond as well as an annual payment of $100,000. Salame signed the professional services agreement on behalf of FTX Digital Markets. Bond did not perform any services for FTX Digital Markets pursuant to the professional services agreement.

“On or about June 1, 2022, Salame caused FTX Digital Markets to send a $400,000 wire transfer from its Fidelity Bank (Bahamas) account to Bond’s personal bank account. The $400,000 transfer was made from misappropriated debtor funds because, prior to June 1, 2022, FTX Digital Markets’ Fidelity account was funded entirely by transfers from FTX’s Signature account.”

Summing up his case, Mr Ray alleged: “Between November 2020 and November 2022, Salame went on an extravagant spending spree funded by his receipt of tens of millions of misappropriated debtor funds-  including funds he had ‘borrowed’ from Alameda that ‘[he] never intended to repay’.

“Salame took advantage of his senior position at the FTX group to direct the transfer of approximately $98.8m from plaintiffs to his personal bank and his exchange accounts. These transfers were not justified by any legitimate business objectives of the FTX group, and constituted the deliberate looting of debtor assets, which Salame used to make millions of dollars in donations to numerous politicians, purchase luxury real estate and fund personal business ventures.”

The latest claim against Mr Salame, in which Mr Ray appears to have thrown in every possible accusation, is merely one of a slew of lawsuits that the FTX Chapter 11 head has filed in recent weeks against potential asset recovery targets on behalf of clients and creditors.

The Bahamian liquidators for FTX Digital Markets, namely Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves, are named as co-plaintiffs alongside Mr Ray in yesterday’s action seeking to recover $1.76bn from rival crypto exchange, Binance, and its principal, Changpeng Zhao (CZ).

And Mr Ray has also gone after Deltec Bank & Trust’s chairman, Jean Chalopin, in a bid to recover FTX’s $11.5m investment in the latter’s US bank. Deltec Bank & Trust is not named as a defendant, and does not feature, in the latest legal claim.

“In early 2022, plaintiff (FTX) invested $11.5m into FBH Corporation, a bank holding company led by Jean Chalopin, in exchange for an approximately 10 percent interest in FBH. FBH had acquired defendant Farmington State Bank in 2020,” Mr Ray alleged.

“Around the time of plaintiff’s investment in FBH, Farmington was the nation’s 28th smallest bank by assets and its reported net worth was $5.7m, meaning Plaintiff paid an amount equal to double the bank’s entire reported net worth for just a 10 percent interest.

“Farmington, at the time, operated as a single-branch bank and community lender to the small agricultural town of Farmington, Washington. In this role, it provided traditional banking and lending services, and reportedly did not offer online banking or even any credit cards. Following the investment, Farmington, however, quickly rebranded as Geniome Bank and then Moonstone Bank.”

While Moonstone altered its business model to focus on digital assets, Mr Ray asserted: “Moonstone’s new business model violated regulatory restrictions that had been in effect at least since the date on which Chalopin had acquired Farmington.

“These restrictions required FBH and Moonstone to receive approval before changing the bank’s business plan, changing senior management, expending resources to develop digital banking products and customer-facing applications, or pursuing a strategy focused on digital banking services.

“The FTX group also opened bank accounts with Moonstone to facilitate a $50m tax safe-harbour required by a transaction with another US company. After federal prosecutors seized that $50m in the Moonstone bank account of an FTX group affiliate in connection with the indictment of Bankman-Fried, the bank rebranded once more and returned to its original name, Farmington, and original purpose as a community bank.

“But the damage had been done. Chalopin had acquired Moonstone subject to regulatory restrictions and induced the FTX group to invest into it based on a business model that violated those restrictions. Farmington’s assets were sold, and it was ultimately directed by the Federal Reserve Bank to wind down, rendering the FTX group’s investment worthless, or at minimum, significantly devalued.”