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FTX Reaches Agreement With Bahamas Liquidators On Asset Recovery -- WSJ

The Wall Street Journal · 01/06/2023 17:49

By Alexander Saeedy

FTX's new management and liquidators in the Bahamas have signed an agreement to cooperate and collect assets on behalf of creditors, capping off a prolonged row between the two parties over who controls the bankrupt exchange's remaining property.

The parties have agreed to share information, as well as help to secure and distribute assets that belong to FTX entities in the Bahamas and abroad, according to a Friday press release. FTX had been headquartered in the Bahamas since 2021 and its international exchange was overseen by Bahamian regulators.

"There are some issues where we do not yet have a meeting of the minds, but we resolved many of the outstanding matters and have a path forward to resolve the rest," said John J. Ray III, FTX's new chief executive, in a statement.

Plans to cooperate may resolve a prolonged battle between government officials in the Bahamas and FTX's new U.S.-based management, who have publicly traded barbs and accused the other of misconduct for almost two months.

As FTX suffered from billions in customer withdrawals and teetered toward bankruptcy, Bahamian regulators ruled that a local unit housing the international exchange was insolvent and appointed liquidators to collect billions of its assets. One day later, Sam Bankman-Fried resigned as FTX's chief executive and passed control of FTX to Mr. Ray, who filed more than 130 FTX subsidiaries for chapter 11 protection.

Companies that file for bankruptcy in the U.S. typically benefit from a legal firewall around their assets. But liquidators in the Bahamas still grabbed control of FTX assets after Mr. Ray filed the company for bankruptcy, including crypto tokens they then valued around $3.5 billion, according to Bahamian regulators.

FTX's U.S. lawyers accused the Bahamian liquidators of "directing unauthorized access...for the purpose of obtaining digital assets," while the Bahamian government countered that Mr. Ray was making unfounded accusations and questioned his motives.

Friday's agreement suggests both sides are ready to move past those disputes as federal authorities in the U.S. have begun to seize FTX assets after they unveiled criminal charges against Mr. Bankman-Fried for his role in improperly using customer funds.

The U.S. government has already seized around $100 million that the Bahamian exchange kept in accounts at Silvergate Capital Corp., a crypto bank, and are in the process of taking around 56 million Robinhood shares, whose ownership is disputed by various firms.

The federal government's entrance into a matrix of competing claims for control over FTX assets may further complicate customers' ability to recover their money, which has been locked up on the platform since November.

Mr. Ray told Congress in December that FTX's U.S. entity isn't solvent, putting into doubt whether American customers can expect to see their funds returned. He also said FTX's international customers' funds were commingled with accounts belonging to Alameda Research, a trading firm affiliated with FTX, whose own losses on bad crypto bets total in the billions.

-- Vicky Ge Huang contributed to this article

Write to Alexander Saeedy at alexander.saeedy@wsj.com

(END) Dow Jones Newswires

January 06, 2023 17:49 ET (22:49 GMT)

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