Yahoo Finance Fight over collapse of $32bn FTX as Bahamas tries to take control of bankruptcy case from US courts
The disgraced founder of collapsed cryptocurrency business FTX has been accused of trying to syphon assets from the exchange to the Bahamas.
Lawyers handling the bankruptcy filed an emergency motion on Thursday night, alleging Sam Bankman-Fried was attempting to “undermine” the court process and trying to “move assets from the debtors to accounts in the Bahamas under the control of the Bahamian government”.
It comes amid a brewing legal battle over jurisdiction of the bankruptcy, with US and Bahamian authorities tussling over who should oversee the case.
Cryptocurrency exchange FTX, founded by 30-year-old Mr Bankman-Fried, filed for bankruptcy protection in Delaware last week, leaving up to one million creditors out of pocket and a $8bn black hole in its accounts.
The cryptocurrency company, which was run out of a $40m penthouse in the Bahamas, failed after executives secretly used billions in customer deposits to fund risky trades at a crypto hedge fund. Earlier this year it had been valued at $32bn.
The bankruptcy case in the US is being handled by John Jay Ray, a restructuring veteran who oversaw the unwinding of collapsed energy giant Enron.
However, on Wednesday the Bahamas unit of FTX filed a separate motion for bankruptcy on behalf of the country’s regulators in another court. The filing called for the US to recognise liquidation proceedings on the Caribbean island.
The Bahamas Securities Commission said on Thursday it had used powers granted by its Supreme Court to “transfer all of the assets of” FTX’s Bahamas division to its own custody for “safekeeping”.
In response, lawyers working with Mr Ray accused the Bahamas of securing “unauthorised access” to the company’s systems “for the purpose of obtaining digital assets”.
Hundreds of millions of dollars in FTX’s cryptocurrency tokens were transferred out of the company in the wake of its US bankruptcy filings.
FTX’s lawyers claimed that on November 13, two days after filing for bankruptcy in the US, “certain post-petition transfers” were made by Mr Bankman-Fried from its assets to accounts controlled by Bahamian authorities. The lawyers added that Mr Bankman-Fried appeared at the time to be “effectively in the custody of Bahamas authorities”.
FTX is facing multiple regulatory investigations by dozens of authorities in the US as well as inquiries by Bahamas regulators and police.
Lawyers acting for FTX accused the company’s founder of “incessant and disruptive tweeting” since the company was bankrupted.
In private messages revealed earlier this week, Mr Bankman-Fried, known as SBF, told a journalist that he would seek to “win a jurisdictional battle vs. Delaware” over the case. He is still trying to raise up to $8bn to bail out the exchange, despite resigning as chief executive last week.
Mr Ray, who is now chief executive of FTX, said on Wednesday: “Mr Bankman-Fried has no ongoing role at FTX, FTX US or Alameda Research Ltd and does not speak on their behalf.”
Legal filings in the case show Mr Bankman-Fried also took a personal loan worth $1bn from Alameda, his cryptocurrency hedge fund that received funding from FTX customer accounts. He did not respond to a request for comment.
