US Bankruptcy Attorney for FTX Spars With Bahamas

Choice words, not assets, are being exchanged between FTX’s US bankruptcy attorney and Bahamian officials.

While Sam Bankman-Fried, disgraced founder of the failed cryptocurrency exchange FTX, awaits his extradition to the U.S. in a Bahamian jail cell, his ex-company’s legal team isn’t mincing words as they clash with their respective peers on the island nation over unwinding the remains of his once high-flying crypto empire.

“We do not trust the Bahamian government,” lawyer James Bromley, who is representing FTX, said during a virtual hearing on Wednesday (Dec. 14).

He was addressing a motion filed by liquidators of FTX’s Bahamian businesses that requested access to the Slack, Google and Amazon Web Services accounts and data of FTX’s U.S. business.

Bromley argued before the judge overseeing the case that Bahamian regulators had previously worked with SBF, prior to his arrest, to undermine the U.S. bankruptcy case by withdrawing $100 million from the platform as it collapsed.

“This is dangerous information,” Bromley said, referring to the internal files.

A Fraught Relationship

FTX’s more than 100 interrelated affiliates spread across jurisdictions are exacerbating tensions between the various teams of lawyers, liquidators and officials tasked with unwinding the remains of a once-heralded crypto empire.

The conflict was exacerbated on Monday (Dec. 12) when Bahamas court officials demanded the Delaware judge overseeing the company’s U.S. bankruptcy allow Bahamian regulators to assume control of FTX’s $256 million real estate portfolio, which reportedly consists of up to 35 properties spread across the island nation.

FTX had planned a $60 million office campus in the Bahamas. Outside of a ceremonial groundbreaking, construction on the nearly five acres of land reportedly never commenced.

The request from the Bahamas sparked pushback from John J. Ray III, the CEO installed to oversee FTX’s Chapter 11 restructuring.

Ray made his name clawing back more than 50 cents on the dollar for Enron’s creditors after that company’s own infamous implosion, and he has committed himself to similarly maximizing recovery for FTX’s clients.

On Wednesday, the second day of the hearing, Ray described Bahamian government’s actions as “alarming.”

“Unlike the Chapter 11 process, there is no transparency in the process in the Bahamas,” Ray said. “We have repeatedly asked them for clarity on what they’ve been doing, and we’ve been shot down on that.”

The Securities Commission of the Bahamas had earlier released a statement calling comments made by Ray about their government’s response to the FTX collapse as “misstatements” that “advance questionable agendas.”

According to documents unsealed in FTX’s bankruptcy, it was the Ryan Salame, the co-CEO of FTX’s Bahamas arm FTX Digital Markets, who tipped island regulators off to the potential misuse of client funds at the exchange surrounding a transfer to Alameda Research. The warning prompted a criminal investigation into FTX.

From Behemoth to Bankrupt

While lawyers and liquidators for his former company bandy words, one-time paper billionaire Sam Bankman-Fried sits in a jail cell awaiting his fate. He is the only senior FTX executive currently charged with any crimes.

Unfortunately for him, that jail cell is far cry from his former oceanfront penthouse and sits in a prison described by the U.S. State Department as being overcrowded, infested with rats and maggots, and featuring poor sanitation and below-average medical care, with buckets serving as toilets.

Still more unfortunately for the failed founder, his request for a $250,000 bail was denied by the Bahamian judge.

As PYMNTS reported Tuesday (Dec. 13), Bankman-Fried faces a slew of civil and criminal charges from the U.S. Department of Justice (DOJ), Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).

A hearing on his extradition to the U.S. has been set for Feb. 8, meaning Sam will remain known primarily as inmate #14732 throughout the holidays and New Year.

As reported by Bloomberg, his parents have asked the island jail whether vegan meals could be delivered to him.

While he originally planned to fight his extradition, the inability of Bankman-Fried to win his notably lenient bail request may end up turning the tide on his calculations around returning to American soil versus sitting in a grimy Bahamian jail cell.