By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Supreme Court has approved a $10m payment to the Securities Commission to compensate for safeguarding assets belonging to FTX victims in the wake of the crypto exchange’s November 2022 collapse.

Justice Loren Klein, in a signed February 6, 2025, Order that was filed with the Supreme Court registry five days later, permitted the liquidators of FTX’s Bahamian subsidiary to pay out the regulator’s claim for administrative expenses incurred in protecting digital and other assets owned by the crypto exchange’s creditors over an 18-month period through to April 2024.

“Pursuant to the Companies Act section 205 (3) and the fourth schedule, part one, paragraphs five and six, this honourable court sanctions the exercise of the joint official liquidators’ powers to cause FTX Digital Markets to enter into the administrative claims settlement agreement,” the Order, seen by Tribune Business, states.

Describing the Securities Commission’s claim as an “administrative expense’, the Order said the $10m will cover “expenses incurred as a result of steps that the Securities Commission of The Bahamas took to protect digital assets on behalf of the FTX Digital Markets estate”. FTX Digital Market was the crypto exchange’s Bahamian subsidiary.

Tribune Business previously reported that the Securities Commission took into its custody digital and other assets which, at the time, were said to be collectively valued at around $426m. This occurred in early November 2022, just days after FTX collapsed and its Bahamian subsidiary was placed into provisional liquidation by the Supreme Court.

The regulator obtained an emergency court Order approving the transfer amid fears that the collapsed crypto exchange was being hacked, and these assets - which were owned by FTX clients and creditors - would be stolen and/or irretrievably lost. The Securities Commission had to work with FTX’s now-jailed founder, Sam Bankman-Fried, and his associates in this process as they were the only ones holding the ‘key’ to these assets.

Christina Rolle, the Securities Commission’s executive director, in a January 28, 2025, affidavit set out “the basis upon which the Commission has advanced its claim for payment in the amount of $10m” via a December 4, 2024, invoice sent to the FTX Digital Markets liquidation trio of Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accountants, Kevin Cambridge and Peter Greaves.

“Pursuant to the transfer Order entered herein on November 12, 2022, the Commission assumed custody and control of the digital assets then under the control of former directors of FTX Digital Markets for the purpose of safeguarding such assets for the benefit of the clients and creditors of FTX Digital Markets, and because it was in the public interest to do so,” Ms Rolle said.

A further Supreme Court Order, dated November 21, 2022, directed that the Securities Commission’s role would be that of a trustee for these assets as governed by the Trustee Act. It was to hold the assets in its possession for the benefit of FTX victims pending further directions from the court.

“The Commission acted as court-appointed trustee of the digital assets from November 2022 to April 2024,” Ms Rolle added. Its duties, as set out in the invoice sent to the FTX Digital Markets’ liquidators, included overseeing the assets’ transfer to a secure wallet; ongoing monitoring and reporting of these holdings; their transfer to the liquidators between April 17-22, 2024; and associated regulatory duties.

To calculate its $10m claim, Ms Rolle said the Securities Commission “did not consider it appropriate to advance a claim for its remuneration for acting as trustee for safeguarding the assets that has been calculated as a percentage of the value of the digital assets”. Thus it rejected the approach that would have been taken by a commercial, for-profit trustee.

“In addition, given the risks and potential valuation of the digital assets held in safe custody by the Commission, such an approach might have been considered prejudicial to the interest of creditors of the insolvency estate,” she said.

“Further, the Commission does not charge hourly rates for the performance of services. Thus, fixing an hourly rate in respect of the services provided to safeguard the assets was likewise considered by the Commission as an inappropriate approach.

“In the circumstances, the Commission determined it would be most appropriate to negotiate and agree with FTX Digital Markets, acting through their joint official liquidators, a flat fee as remuneration for services rendered as trustee but, in doing so, give due weight and regard to the substantial benefit that accrued to the insolvency estate of FTX Digital Markets, its creditors and clients as a result of the steps taken by the Commission to safeguard the said assets.”

Ms Rolle said these negotiations took place between September 2024 and December 2024, and the $10m payment was also agreed and supported by John Ray, who oversees the 134 FTX entities in the separate Chapter 11 bankruptcy proceedings in the US, and the liquidation committee for FTX Digital Markets.

The Securities Commission’s $10m payment is part of a wider Supreme Court-approved settlement where the Bahamian regulator has agreed to relegate its claim for $221.55m in regulatory sanctions and penalties against FTX Digital Markets below those of other creditors so that clients and other victims benefit first from - and maximise on - recovery of their assets.

FTX Digital Markets’ liquidators have also confirmed, via a press statement issued on Friday, that the first wave of creditor payouts to so-called “convenience class” victims owed less than $50,000 will begin today. Those receiving payouts will recover around 120 percent of what they are owed, meaning they will receive more than the value of their claim, due to interest paid on their assets since FTX’s collapse.

“The distribution will be a first and final distribution. The amount paid to customers/creditors will be around 120 percent, representing 100 percent of customer/creditor adjudicated claim values plus post-petition interest,” the Bahamian liquidator trio said.

They added that creditors not included in the first payment round may be owed more than $50,000; failed to meet the liquidators’ requirements; have a claim that is still being reviewed to determine its legitimacy; or elected to “wait for alternative distribution providers to become available”.

“We note customers/creditors may have passed these requirements since the cut-off date for the first distributions. Distributions will be made periodically and customers/creditors will receive notice prior to the next distribution if they are eligible,” the Bahamian liquidator trio said.

“Any customer/creditor yet to meet the requirements will remain eligible for the distribution process via later distributions with the opportunity to receive a catch-up distribution at a later date if the requirements are subsequently met.

“The joint official liquidators anticipate the first catch-up distribution will be made in the 2025 second quarter, and suggest customers/creditors action any requests from the joint official liquidators as soon as possible to minimise any additional delays in receiving their catch-up distribution,” they added.

“The timing of distributions for non-convenience class customers/creditors and non-customer creditors has not yet been set but these are expected to be made in the 2025 second quarter. All non-convenience class customers/creditors will be contacted once a date has been set.”

The Bahamian liquidators, concluding with a warning, said: “Customers/creditors should be aware of potential scams related to the distribution process. The liquidators will never ask for any payment details to be provided via e-mail. Please only follow the instructions to enter your payment details via the FTX Digital claim portal, and do not click into external websites via untrusted e-mails.”

This newspaper understands that persons in the “convenience” class group account for around 80 percent of all FTX Digital Markets creditors, but the timing of their payout will depend on whether they have fulfilled Know Your Customer (KYC) and other conditions.  The fact they will recover more than they are owed is because 9 percent interest has been accumulating on their asset principal since FTX collapsed.