FTX is suing liquidators of its Bahamian affiliate over ownership of crypto exchange
By Dietrich Knauth
(Reuters) – Bankrupt crypto exchange FTX has sued the liquidators overseeing the liquidation of its Bahamian affiliate FTX Digital Markets, accusing them of falsely claiming ownership of the exchange’s assets.
FTX Trading, led by new CEO John Ray, asked a US bankruptcy judge in Delaware on Sunday to rule that FTX Digital Markets
had no ownership interest in FTX.com’s cryptocurrency, intellectual property and customer relationships.
The Bahamian connection was a “corporate shell” and the “middle” of founder Sam Bankman-Fried’s efforts “to funnel FTX Trading customer deposits and other valuable property and rights to the Bahamas, beyond the reach of US regulators and courts,” according to the lawsuit.
FTX Digital Markets’ liquidators recently asked the Bahamas Supreme Court to rule on which FTX entity is responsible for repaying customers and should control its assets, arguing that the Bahamian company was taking on a more central role for FTX.com when the company moved to the Bahamas from its former headquarters in Hong Kong.
FTX’s business plan and a May 2022 amendment to FTX.com’s terms of service made it clear that FTX “intended to migrate existing international customers to FTX Digital,” the liquidators said in February proceedings in Bahamas court.
FTX disputed this in Sunday’s filing, saying that FTX Digital Markets never performed any essential services for the exchange business and that the “secret” change to FTX.com’s terms of service did not transfer any property or liability to FTX Digital Markets.
The Bahamas-based liquidators declined to comment. FTX declined to comment. Bankman-Fried did not immediately respond to a request for comment.
FTX has been at loggerheads with Bahamian officials ever since filing for bankruptcy protection on Nov. 11, with a hole in its balance sheet that left its 9 million customers facing billions in potential losses.
The Securities Commission of the Bahamas began liquidation proceedings against FTX Digital Markets a day before the US bankruptcy filing of FTX Trading and more than 100 related companies, and the two sides have sparred over ownership of FTX assets and access to company data.
FTX and the Bahamian liquidators had sought to cool the simmering dispute in January, reaching an agreement to cooperate on recovery efforts. FTX Digital Markets said in recent court filings in the Bahamas that the cooperative agreement does not prevent it from seeking a ruling on which FTX entity controlled the exchange.
Bankman-Fried has been arrested on fraud charges, and several FTX insiders have pleaded guilty. Bankman-Fried has pleaded not guilty and is expected to stand trial in October.
FTX reported this month that Bankman-Fried took $2.2 billion from the company during a period when the crypto exchange lost $8 billion in customer money.
(Reporting by Dietrich Knauth in New York Editing by Alexia Garamfalvi and Matthew Lewis)
