Ever since FTX unceremoniously imploded back in November, regulators and courthouses in both the USA and the Bahamas have been working furiously to get as many FTX-held assets back into the hands of their original owners, with varying degrees of success.
While court cases in the US have temporarily stalled, owed in part to SBF’s plea of innocence, Bahamian regulators were able to seize some assets from the get-go and appear to be closing in on FTX Digital Markets, the Bahamian subsidiary of the failed crypto exchange.
Dispute Over Prominence of Bahamian Entity
The current lawsuit has been filed by FTX US against the Bahamian authorities in charge of liquidating FTX Digital Markets. If the former wins the lawsuit, it could mean that a greater share of the assets that were being controlled by FTX would be disposed of by US courts, possibly resulting in a greater recovery by US customers to the detriment of international customers.
In order to set this process in motion, the new CEO of FTX, John J Ray III, filed a request to the Delaware bankruptcy court, requesting recognition that FTX Digital Markets “had no ownership interest in FTX.com’s cryptocurrency, intellectual property, and customer relationships.”
FTX’s interim leader posited that FTX DM was nothing more than a shell corporation created for the purpose of moving money out of the reach of US regulators and was not vital to the legitimate operations of the exchange.
“(FTXDM) was a corporate shell and the centrepiece of founder Sam Bankman-Fried’s effort to funnel FTX Trading customer deposits and other valuable property and rights to the Bahamas, out of the reach of American regulators and courts.”
Bahamian Authorities Claim FTX DM Was Main Center
Despite FTX US’s claim that FTX DM never performed any significant operational services for the FTX Group, Bahamian regulators requested that the local Supreme Court decide which entity was more vital to the exchange’s operations and which should be the one paying out customers once the dust settles.
According to Bahamian liquidators, the fact that FTX moved its headquarters from Hong Kong to the Bahamas proves that FTX DM was far more than just a shell company. Furthermore, the firm’s business plans and a ToS update dating back to May 2022 purportedly show a “clear intention” to move customer deposits to FTX DM, according to Bahamas-based liquidators.
The dispute over FTX DM’s importance comes in spite of an agreement between FTX US and Bahamian authorities to coordinate recovery efforts. According to Bahamian authorities, the cooperation memorandum does not prevent them from seeking a ruling on which FTX entity was central to the now-defunct crypto empire’s operations.
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