Recent reports claim that the defunct cryptocurrency exchange FTX is seeking legal protection from the liquidators in charge of winding down its Bahamas unit. The exchange has filed a motion with a US bankruptcy judge requesting that its assets be safeguarded from the liquidation process.
The move is the latest twist in a long-running dispute between FTX and the liquidators, who are tasked with distributing the exchange’s remaining assets to creditors. FTX claims that the liquidators have not acted in the business’s best interests and that their actions have put its assets at risk.
Lawsuit alleges FTX founder used affiliate to evade oversight
According to the lawsuit, FTX’s Bahamian affiliate was a corporate body that played a central role in the company’s founder, Sam Bankman-Fried’s attempt to channel customer deposits and other valuable assets to the Bahamas beyond the jurisdiction of US regulators and courts.
Further, the lawsuit claims that Bankman-Fried used the affiliate to facilitate illicit activities such as market manipulation and insider trading without fear of prosecution. However, Bankman-Fried denied the allegations and said he would contest the lawsuit in court.
Consequently, FTX is pursuing the aid of US Bankruptcy Judge John Dorsey to intervene in a legal matter involving assets lodged by Sam Bankman-Fried and other employees under the Bahamas unit. FTX also claims these assets are defrauding transfers and belong to them.
Claims against FTX escalate, liquidators issue warning
The filing indicates that the claims against FTX made by the Bahamian liquidators are growing in magnitude and quantity. Furthermore, they have issued a warning about obstructing preferential payments that were made to Alameda.
Moreover, the filing proposes that without the intervention of the US bankruptcy court, the Bahamian liquidators may continue to make unsubstantiated claims that could potentially harm not only FTX clients but also all other FTX Debtors’ creditors.
Liquidators in charge of the FTX Digital Markets division in the Bahamas have requested the Bahamas Supreme Court to determine which FTX entity is accountable for reimbursing customers and managing assets.
They further stated that the Bahamian company assumed a more significant position for FTX.com, as the company planned to move its current global clientele to FTX Digital, as per the latest modifications in FTX.com’s terms and conditions.
FTX Refutes Claims of Wrongdoing
In contrast to the Bahamian government’s claims, FTX argued that its subsidiary, FTX Digital Markets, did not provide effective services and that the undisclosed alteration in the subsidiary’s terms of service did not result in any transfer of property or obligations to FTX Digital Markets.
FTX and its crypto-related companies filed for Chapter 11 bankruptcy in November, and since then, they have been in dispute with the authorities in the Bahamas.
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