FTX, Bahamas liquidators remain at loggerheads over system access

FTX, the Bahamas government, and lawyers hired to liquidate the failed crypto empire’s Bahamian operations remain at loggerheads over granting access to FTX’s Bahamian computers to review what assets are still there.

In a U.S. Bankruptcy Court, District of Delaware hearing today, the two sides argued, again, over continuous access to the files.

New FTX CEO John Ray III and lawyers from the firm Sullivan and Cromwell hired to represent the company in bankruptcy proceedings have accused the Bahamian government of collaborating with federally-indicted former CEO Sam Bankman-Fried to illegally shift assets out of the Bahamian operation, an accusation the Bahamian government has objected to both in public statements and court.

Executives from FTX, Bahamian government officials, and lawyers met yesterday in New York and had “a productive exchange of views,” according to Sullivan and Cromwell partner James Bromley. But the company still does not trust the Bahamian government and lawyers appointed to liquidate FTX Digital Markets — the portion of Bankman-Fried’s large corporate web that is in a separate bankruptcy process in the Bahamas — with continuous access to computer systems.

Bromley said the company could allow “static” access to computer systems for their counterparts but continue to oppose continuous access due to suspicions around the relationship between Bankman-Fried and the Bahamian government. The country's securities regulator pulled assets worth hundreds of millions of dollars out of the company after obtaining a court order from the Supreme Court of the Bahamas to do so. 

“We think that makes the issue simpler and cleaner,” said Bromley.

But a representative for the liquidators, Jason Zakia of the law firm White and Case, disputed that contention.

“They need access to their debtors’ books and records in order to do their job as court-appointed fiduciaries,” he told presiding Judge John Dorsey. “This is really interfering with the ability of the liquidators to do their job.”

A hearing, with witnesses expected, is scheduled for Jan. 6 if the two sides cannot agree on a resolution before then.

On Monday, Bromley and lawyers for the company submitted emails from the week of FTX’s collapse between Bankman-Fried and Bahamas Attorney General Ryan Pinder showing Bankman-Fried offering to give preferential treatment to Bahamas customers by fully refunding account holders from the island nation. The Bahamas Securities Commission, other FTX executives, and Bankman-Fried’s father were included in the email thread. Hours later, the company claimed on Twitter that the government and regulators had told it to facilitate withdrawals for local customers.

The Bahamas Securities Commission disputed this in a court filing on Wednesday that included correspondence by the regulator on the same day alerting Bahamian police to the transfer of funds from FTX to Alameda Research after a call between the regulator and FTX co-CEO Ryan Salame.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.