FTX teams in U.S., Bahamas to coordinate fund recovery efforts

© Reuters. FILE PHOTO: The logo of FTX is seen at the entrance of the FTX Arena in Miami, Florida, U.S., November 12, 2022. REUTERS/Marco Bello/File Photo

By Tom Hals and Dietrich Knauth

(Reuters) -FTX's U.S.-based bankruptcy team agreed to coordinate with liquidators who are winding down the crypto exchange's operations in the Bahamas, resolving a dispute that threatened the recovery of what could be billions of dollars in lost funds.

In a joint statement on Friday, the two sides said they will work to share information, secure property and coordinate litigation against third parties.

FTX’s U.S. bankruptcy team has been at odds with Bahamian officials since November, when competing bankruptcies were filed in the two countries.

The Securities Commission of the Bahamas began liquidation proceedings on Nov. 10 against FTX Digital Markets Ltd., the company's Bahamas-based unit. The next day a U.S. Chapter 11 was filed in Delaware, which included more than 100 FTX entities including FTX Trading and crypto hedge fund Alameda Research.

Bahamian regulators have seized FTX assets, which officials said was meant to safeguard assets that will ultimately be returned to creditors of FTX Digital Markets.

The U.S. team has argued that those assets must be part of the U.S. bankruptcy, because FTX Digital Markets is only a "local service company" with no significant creditors and no direct connection to FTX’s crypto business.

The U.S. team has also disputed the size of the Bahamian asset that were seized, saying they were worth $296 million in November, not $3.5 billion.

John Ray, who took control of the FTX and is overseeing its U.S. bankruptcy after founder Sam Bankman-Fried resigned in November, said there were still issues to be worked out in the agreement with the liquidators from the Bahamas.

Ray, one of the liquidators and attorneys for the liquidators did not respond to a request for comment.

Bankman-Fried was arrested on fraud charges and pleaded not guilty on Jan. 3. Ray has said the exchange lost $8 billion of customer money, and added the bankruptcy team is focused on recovering assets to repay creditors.