FTX Sues Bahamian Subsidiary Liquidators Over Crypto Exchange Ownership

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March 20 (Reuters) – Bankrupt crypto exchange FTX has sued liquidators overseeing the liquidation of its Bahamian subsidiary FTX Digital Markets, accusing them of falsely claiming ownership of the exchange’s assets.

FTX Trading, led by new CEO John Ray, on Sunday asked a U.S. bankruptcy judge in Delaware to rule that FTX Digital Markets

had no stake in FTX.com’s cryptocurrency, intellectual property and customer relationships.

The Bahamas branch was a “corporate shell” and the “centerpiece” of founder Sam Bankman-Fried’s efforts “to funnel FTX Trading client deposits and other valuable property and rights into the Bahamas, out of reach of U.S. regulators and courts,” according to the lawsuit.

FTX Digital Markets liquidators recently asked the Bahamian Supreme Court to decide which FTX entity is responsible for reimbursing customers and should control its assets, arguing that the Bahamian company has taken on a more central role for FTX.com as the company was moving 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 “intends to migrate existing international customers to FTX Digital,” the liquidators said in a filing. in February in court in the Bahamas.

FTX disputed this in Sunday’s filing, saying that FTX Digital Markets never provided services material to exchange business and that the “secret” change to FTX.com’s terms of service did not transfer any ownership. 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 odds with Bahamian authorities since filing for bankruptcy on Nov. 11, with a hole in its balance sheet that left its 9 million customers facing billions in potential losses.

The Bahamas Securities Commission began liquidation proceedings against FTX Digital Markets a day before the US filing for bankruptcy of FTX Trading and more than 100 affiliates, and the two sides squabbled over ownership of FTX’s assets and the access to company data.

FTX and the Bahamian liquidators had sought to calm the simmering dispute in January, reaching an agreement to cooperate on asset recovery efforts. FTX Digital Markets said in recent court filings in the Bahamas that the cooperation agreement does not preclude it from seeking a ruling on which FTX entity controls the exchange.

Bankman-Fried was arrested for fraud, and several FTX insiders pleaded guilty to criminal charges. Bankman-Fried has denied any wrongdoing 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 client money.

Reporting by Dietrich Knauth in New York Editing by Alexia Garamfalvi and Matthew Lewis

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