FTX’s Bahamas liquidators reject ‘validity’ of US bankruptcy proceedings
FTX collapsed last week and filed for bankruptcy protection, sending shockwaves through the cryptocurrency industry
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Liquidators for the scandal-ridden cryptocurrency exchange FTX say liquidation proceedings in the Bahamas – where the company is based – should take precedence over bankruptcy proceedings in the United States.
The Securities Commission of the Bahamas appointed liquidators for FTX Digital Markets, the exchange’s Bahamas unit, last week.
Representations of cryptocurrencies are seen in front of displayed FTX logo and decreasing stock graph in this illustration taken Nov. 10, 2022. (Reuters/Dado Ruvic/Illustration/File Photo / Reuters Photos)
Late Tuesday, the liquidators filed a Chapter 15 petition in the U.S. bankruptcy court in New York. Foreign companies use Chapter 15 proceedings to seek U.S. courts' cooperation in cross-border bankruptcy cases.
In the filing, the liquidators asked the court to recognize FTX’s bankruptcy in the Bahamas and said they "reject the validity of U.S. proceedings." The liquidators also asked the court to obtain records from FTX and block asset transfers to protect creditors of the Bahamas-based company.
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In court documents filed with the petition, one of the liquidators, Bahamas-based restructuring attorney Brian Simms, argued that the U.S. bankruptcy proceedings were not authorized under Bahamas law.
Simms further argued that only the Bahamas liquidators have the authority to put FTX affiliates into bankruptcy because a Bahamas court has authorized them to protect the assets of those affiliates that operate from within the country.
The logo of FTX is seen on a flag at the entrance of the FTX Arena in Miami, Fla.,, Nov. 12, 2022. (Reuters/Marco Bello/File Photo / Reuters Photos)
FTX collapsed last week and filed for bankruptcy protection, sending shockwaves through the cryptocurrency industry, which has seen an enormous amount of volatility this year, including a sharp decline in the price of bitcoin and other digital assets.
The House Financial Services Committee said Wednesday that it expects to hear from Sam Bankman-Fried, the 30-year-old founder and former CEO of FTX, who was previously hailed as a hero in the crypto community but now faces potential civil and criminal charges related to FTX's collapse.
The panel also expects to get testimony from FTX representatives, other crypto exchanges including Binance, Bankman-Fried's hedge fund, Alameda Research, and others at a December hearing.
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The sheer size of FTX's collapse highlights the massive market risks inherent in the growing crypto industry. Billions of dollars of wealth may have been destroyed in a few days. The circumstances have prompted investigations by the Justice Department and Securities and Exchange Commission.
The Associated Press contributed to this report.