Bahamian liquidators fire FTX warning shot

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators yesterday warned their US counterparts that the failed crypto exchange’s $446m claim against another digital assets firm will not be resolved unless their interests are satisfied too.

Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) duo, Kevin Cambridge and Peter Greaves, argued that there will be no “global peace” in FTX’s battle with Voyager Digital unless the Bahamian liquidation estate’s potential claims are also satisfied.

In legal filings with the Delaware Bankruptcy Court, the trio moved to “preserve their rights” to recover assets belonging to Bahamas-based FTX Digital Markets and its clients/creditors that may have been loaned or otherwise transferred to Voyager via Alameda Research, the speculative trading entity owned by fallen FTX co-founder, Sam Bankman-Fried.

They acted after John Ray, the FTX Trading chief responsible for the 134 entities in Chapter 11 bankruptcy protection in the US, sought the Delaware court’s permission to enter into an agreement with Voyager that sets out a road map or pathway for dealing with the two sides’ competing claims against each other.

Included in these claims is FTX Trading’s bid to recover some $446m it alleges was “preferentially transferred” to Voyager by Alameda Research, with the funds - or a at least a portion of them - representing FTX client monies taken from the crypto exchange. The proposed deal involves Voyager setting aside some $445m in a “reserve” to cover the claim by Alameda and Mr Ray.

The Bahamian provisional liquidators, though, say that Mr Ray never discussed the Voyager agreement or its terms with them. They have, in effect, fired a warning shot across the FTX Trading chief’s bows by asserting that they are not relinquishing their rights to claim a portion of that $445m if those assets can be traced to FTX Digital Markets or its clients/creditors, especially since $7.7bn flowed out of the Bahamian subsidiary prior to the crypto exchange’s implosion.

“By the present motion, the US debtors are seeking to preserve their rights to recover from the Voyager debtors certain funds that Alameda Research transferred during its preference period. The problem here, which can be fixed with a reservation of rights, is that the motion does not address where Alameda obtained the funds to make its transfers in the first instance, or what happened if Alameda itself was required to return funds it improperly obtained,” the trio alleged.

“As we have previously noted to this court, the joint provisional liquidators have identified significant inter-company claims Digital (FTX Digital Markets) has both against FTX Trading and Alameda (as well as certain of their affiliates) related to the pre-petition migration of customers from FTX Trading to Digital.

“More specifically, to-date, the joint provisional liquidators have identified at least $5.6bn in transfers from Digital custodial accounts to FTX Trading, and $2.1bn in transfers from Digital custodial accounts to Alameda. Most notable for the purposes of the motion, a significant proportion of the Digital transfers to the US debtors were completed within the relevant preference periods, making the Voyager Debtors potential subsequent transferees of Digital’s or its customers’ assets.”

Tribune Business understands that the co-operation agreement between the Bahamian liquidators and Mr Ray requires both sides to inform the other if they are seeking to enter agreements such as that provisionally struck with Voyager Digital. “Prior to filing the motion, the US debtors did not discuss any of the foregoing with the joint provisional liquidators,” the Bahamian trio said, hinting at their disquiet.

“Perhaps as a result, the motion envisions that the US debtors alone will control the global resolution of all claims related to any payments made to the Voyager debtors, even though the capital used by the FTX enterprise during the preference period may have originated from Digital accounts or cash directly deposited by Digital’s international customers.

“Were the ongoing investigations to establish the preference payments originated from the Digital estate or Digital’s customers, no settlement of Digital’s claims seeking recovery of those payments can be made without the input and consent of the joint provisional liquidators.”

Mr Simms and his PwC colleagues continued: “Any order approving the motion should therefore make clear that no resolution by the US debtors with the Voyager debtors may affect Digital’s rights, including any of Digital’s own claims against the Voyager debtors....

“The order should make clear that the joint provisional liquidators expressly reserve the right to file and prosecute proofs of claim against the Voyager debtors, including claims related to payments made by any of the US debtors to the Voyager debtors during the relevant preference periods with funds originating from the Digital estate.

“Finally, approval of the motion should not impact the rights of the joint provisional liquidators to seek to intervene in any mediation or litigation concerning the preference claims, including any mediation or litigation that may occur with the Voyager debtors. In short, if there is to be global peace with the Voyager debtors, that peace cannot likely be reached solely in the US.”

Comments

JokeyJack says...

LOL - This gah be long.

Posted 8 March 2023, 3:03 p.m. Suggest removal

killemwitdakno says...

Is the $8.9B that FTx is suing Grayscale for stored with Grayscale, or is that just in indirect damages?

Posted 9 March 2023, 1:56 a.m. Suggest removal

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