FTX is talking to regulators in the Bahamas to try to end the bankruptcy dispute
(Bloomberg) — Regulators and court officials in the Bahamas met this week with the US restructuring team that controls failed crypto firm FTX in an effort to resolve part of an unusual legal standoff that has landed the company in its bankruptcy case.
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Describing the meeting in court on Friday, a US attorney said court-appointed liquidators in the Bahamas are willing to drop their demands for immediate online access to FTX systems, as long as they can have certain data stored on computers. US attorneys for FTX dismissed the Bahamian officials, saying government regulators could not be trusted with “direct” access to the company’s computers.
The case is one of two legal battles pending in federal court in Wilmington, Delaware, in which about 100 FTX units have filed Chapter 11 cases in order to collect as many lost assets as possible to pay the billions owed to creditors. The Bahamas liquidators also want US Bankruptcy Judge John Dorsey to recognize the case they filed in the islands’ Supreme Court as the primary restructuring effort. FTX attorneys are fighting this request.
Both sides said they hope to resolve both issues while they continue negotiating.
The dispute over computer access is “really interfering with the liquidators’ ability to do their job,” Jason Zakia, the liquidators’ attorney, said during a video court hearing Friday morning. Bahamian liquidators argue they are entitled to access the computer network so they can clean up a local subsidiary.
Zakia said liquidators would accept “persistent” access to the data for now. At an earlier hearing, FTX attorney James Bromley said FTX would give the Bahamas limited access to information stored on the company’s servers.
If the two sides fail to strike a deal on data access, Dorsey is scheduled to hold a mini-trial on January 6th. The FTX team said it would present evidence showing that the Bahamas colluded with FTX founder Sam Bankman-Fried, a charge Bahamian lawyers deny. Bankman Fried is under arrest in the Bahamas and faces fraud charges in the United States.
The liquidators control one FTX entity, called FTX Digital, which is overseen by a court in the Bahamas. The US team controls nearly all of what remains of the former Bankman-Fried empire, which filed for court protection from creditors on November 11. This means that most assets, wherever they are found, are likely under Dorsey’s authority.
In a lawsuit Monday, the liquidators demanded that the property ownership unit be separated from bankruptcy in Delaware and sold for parts in the Bahamas.
Among other things, they say that real estate in the Bahamas should be liquidated because the unit that owns it has no connection to the United States – not even to a bank account. They also claim that two signatures were required for the US property holding unit bankruptcy, but only Bankman-Fried authorized the filing, so it is illegal.
The issue is FTX Trading Ltd. , 22-11068, United States. Delaware County Bankruptcy Court.
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