Bahamas liquidators set to access ‘elusive’ FTX data

liquidators, accountants Kevin Cambridge and Peter Greaves, could gain access to the financial and other records critical to progressing FTX Digital Markets’ winding-up.

This data was all under the control of Mr Ray and his team, who had no hesitation in exploiting this leverage in efforts to determine which jurisdiction - The Bahamas or Delaware - would take the dominant role in FTX’s global liquidation, sale and/ or restructuring. Within days of the Bahamian provisional liquidation trio’s appointment, their access - and that of all remaining FTX Digital Markets employees - to the cloudbased data was cut-off by Mr Ray’s Chapter 11 effort.

Pointing out that it was hard to link digital assets transactions to specific FTX entities without access to these records, Mr Simms asserted: “It is accordingly difficult to identify what FTX Digital Markets assets and liabilities are without an electronic paper trail. FTX Digital Markets does not currently have access to that paper trail because the majority of its books and records are controlled by the Chapter 11 debtors.”

Unless they were able to strike the co-operation agreement with Mr Ray, the senior Lennox Paton partner warned that there “would be strong resistance to the joint provisional liquidators’ application for disclosure and turnover of documents” before the Delaware Bankruptcy Court.

“The joint provisional liquidators also had no desire to see substantial costs in legal fees being incurred, and time and opportunities disappear, while litigating the motion,” Mr Simms said, explaining the rationale for the co-operation deal to protect asset recoveries for FTX creditors/ investors.

With both sides having also executed a January 30, 2023, non-disclosure agreement (NDA) to govern information sharing, and the Bahamian and Delaware courts approving the co-operation deal, they are now in a position to move forward.

“Finally, therefore, the joint provisional liquidators and their advisors should shortly obtain access to valuable and critical information about FTX Digital Markets that has so far eluded them,” Mr Simms alleged. “The agreement and the NDA are undoubtedly in the interests of the provisional liquidation of FTX Digital Markets, its customers and creditors.

“Without the agreement and the NDA, there is a real risk of lengthy, protracted litigation in the Delaware Bankruptcy Court to obtain access to information on the international platform and FTX Digital Markets records which will be immensely time-consuming and expensive. Litigation would also undoubtedly delay the progress of the liquidation of FTX Digital Markets and the urgent attention to the myriad of issues that need to be addressed.

“Moreover, given the mingling of FTX Digital

Markets’ records with those of the Chapter 11 debtors and the lack of clarity over the ownership of certain assets, the agreement and the NDA together provide a reasonable attempt to move things forward consensually in order that all parties have access to information that was available to each of them prior to the provisional liquidation of FTX Digital Markets and the Chapter 11 cases and so that the parties can also begin the difficult process of realising assets and identifying persons entitled to them.”

FTX’s Bahamian operation has been branded “a big piece of the puzzle that needs to get resolved” with the provisional liquidators successfully obtaining US legal recognition for their ongoing investigations.

Bankruptcy judge, John Dorsey, signed the order granting the Bahamian trio Chapter 15 status, which will enable them to conduct investigations and pursue assets belonging to the local subsidiary with the full backing of the US legal system. He did so after their US legal representative, Chris Shore of the White & Case law firm, provided an update on the Bahamian provisional liquidators’ work to-date. In doing so, Mr Shore also revealed that the Bahamian Supreme Court has ratified the co-operation agreement thrashed out between