• Ray accused over Bahamas properties

• Liquidators claim aided by local law firm

• Warn: ‘Can’t preserve hundreds of millions’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators have accused their US adversary, aided by its local law firm, of going behind their backs in attempting to sell $256m worth of real estate domiciled in this jurisdiction.

Brian Simms KC, the Lennox Paton senior and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, are alleging that John Ray and his team confessed to instructing their US-based financial advisers to sell the high-end Bahamian real estate acquired by the imploded crypto exchange “for cash” without first informing them.

And the Supreme Court-appointed trio also asserted that Mr Ray’s advisers were aided in this effort by the FTX US chief’s Bahamian attorneys, Peter Maynard & Company, with such activities only “causing confusion” as to who has ultimate control of valuable real estate assets - the FTX Digital Markets liquidators or the US chapter 11 proceedings before the Delaware Bankruptcy Court.

The Bahamian liquidators alleged, in legal papers filed with the Delaware court last week, that the actions of Mr Ray’s agents represented a violation of the January 6, 2023, co-operation agreement that had been hammered out with the FTX US chief during last year’s Christmas holiday. This stipulated that the local trio would take the lead in selling-off Bahamian real estate to recover valuable assets on behalf of FTX creditors, with both sides agreeing on the process to be used.

However, Mr Simms and his colleagues are alleging that Mr Ray, who controls the 134 FTX entities in Chapter 11 bankruptcy protection in Delaware, reneged on this agreement by “threatening” that the bid to liquidate the Bahamian real estate would violate the worldwide asset freeze automatically imposed by the US court proceedings.

The Bahamian trio, in their counterclaim to Mr Ray’s late March 2023 lawsuit that seeks to deny them access to any assets caught in the crypto exchange’s multi-billion dollar collapse, then complained that their efforts to find an alternative solution for FTX’s local property assets proved fruitless prior to being informed of Mr Ray’s alleged attempt to seize control.

“On April 28, 2023, the joint provisional liquidators heard from property managers that individuals from the counterclaim defendants’ local Bahamian counsel and counterclaim defendants’ financial advisor, Alvarez & Marsal North America (A&M), were attempting to access the [FTX] properties and otherwise causing confusion regarding the control of such properties in contravention of the co-operation agreement,” Mr Simms and the PwC duo alleged.

“When the joint provisional liquidators confronted the counterclaim defendants about these actions, the counterclaim defendants informed the joint provisional liquidators that they instructed A&M to sell the properties for cash. The counterclaim defendants did not seek the joint provisional liquidators’ consent before taking the lead on a sale process as they are required to do under the co-operation agreement.

“The joint provisional liquidators did not, and do not, agree to the counterclaim defendants commencing any sale process without the joint provisional liquidators’ consent.......Consistent with the co-operation agreement, the joint provisional liquidators have been acting in good faith to maintain, preserve and protect the properties. They have done so at considerable expense to FTX Digital Markets’ estate including, but not limited to, the payment of security, cleaning and utility costs in connection with the properties.”

Peter Maynard & Company did not reply to Tribune Business requests for comment before press time last night despite Jason Maynard, one of its attorneys and partners, confirming this newspaper’s e-mailed inquiry had been received and that he would “discuss and get back to you shortly”.

The accusations concerning FTX’s $256m Bahamian real estate assets, a not-insignificant source of recovery for the crypto exchange’s creditors and investors, represent the latest front in the jurisdictional battle for control of the liquidation’s fate between this nation and Delaware.

Mr Simms and the PwC duo, in responding to Mr Ray’s assertions that FTX Digital Markets, the Bahamian subsidiary, was an “economic and legal nullity” that served merely as an “offshore front” to enable Sam Bankman-Fried and his closest associates to channel proceeds from their purported fraud away from US regulatory oversight, have launched their own legal counterclaim seeking multiple grounds of relief from the Delaware Bankruptcy Court (see article on Page 1B).

Besides seeking an order that he has breached their co-operation agreement, the Bahamian liquidators also want that court to affirm that Mr Ray and his team have breached the Chapter 15 recognition and asset freeze previously granted to FTX Digital Markets and themselves so that their asset recovery efforts in the US had legal standing. They are also demanding an unspecified sum in damages.

The Bahamian liquidators are also accusing Mr Ray and his team of “interfering” over the US Justice Department seizure of some $151m of FTX Digital Markets assets that were held in US-based bank accounts. This, they assert, has left them “deprived of crucial assets needed to properly administer the FTX Digital Markets estate in an amount no less than $151m.”

Warning that their inability to access these funds has left them unable to secure, and preserve, “hundreds of millions of dollars” of assets in FTX Digital Markets’ name, Mr Simms and his colleagues are alleging that critical sources of recovery for investors and creditors continue to rapidly lose value.

The seized assets include $50m at Moonstone Bank, plus deposits of $6m and 87m euros with Silvergate Bank. “The joint provisional liquidators have been actively seeking the release of the frozen and seized Moonstone account and Silvergate accounts from the US government. But, upon information and belief, the counterclaim defendants have deliberately interfered with these post-seizure efforts,” Mr Simms and his colleagues alleged.

“For example, on April 12, 2023, at a hearing before this court, counsel for the counterclaim defendants conceded that they have been ‘working in parallel’ with the US government to ‘secure’ funds belonging to FTX Digital Markets.... The counterclaim defendants have also continued to assert rights to FTX Digital Markets’ assets in the Moonstone and Silvergate accounts.....

“Without access to liquid funds, the FTX Digital Markets defendants cannot preserve assets in FTX Digital Markets name, which are worth hundreds of millions of dollars. These assets are consequentially being wasted, lost, and depreciated by multi-millions of dollars over time.” In other words, the Bahamian liquidators’ work will come to a screeching halt and FTX’s investors/creditors will lose out in recovering their assets.

The Bahamian liquidators have also renewed their concerns over Mr Ray’s continued failure to hand over all FTX Digital Markets’ cloud-stored books and records, including employee communications. “Most recently, the counterclaim defendants have demanded that the FTX Digital defendants again submit a request for their own information with the promise that, once received, the counterclaim defendants would make the information immediately available,” they asserted.

“Despite the fact that this agreement was the counterclaim defendants’ clear attempt to limit the FTX Digital Markets’ defendants’ use of their own data, the FTX Digital Markets’ defendants acquiesced in an effort to put these gating issues to rest. But even after the FTX Digital Markets defendants served the agreed-upon document requests, the counterclaim defendants have still not agreed to give the joint provisional liquidators FTX Digital Markets’ own data.

“The counterclaim defendants’ actions have deprived the FTX Digital Markets defendants of crucial information needed to properly administer the FTX Digital Markets estate, causing the FTX Digital Markets defendants to incur unnecessary costs and attorneys’ fees.”