The Bahamian Liquidators Assert That FTX Was Not Authorized to File for Bankruptcy in the United States

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Last Updated on November 17, 2022 by Bitfinsider

Bahamian liquidators put another kink into the failed cryptocurrency exchange FTX’s bankruptcy proceedings on Tuesday. Approximately one million creditors are anticipated to be owed by the roughly 100 entities that filed for bankruptcy on Friday.

In a court filing, Bahamas-based attorney Brian Simms, one of the provisional liquidators appointed by the Bahamas Supreme Court, stated that FTX was not authorized to file for bankruptcy in the United States and that he “rejects the validity of any alleged attempt to place FTX affiliates in bankruptcy.”

Tuesday, Simms and other liquidators filed for Chapter 15 bankruptcy protection in the Southern District of New York (SDNY) on behalf of the Bahamas branch of insolvent crypto exchange FTX Digital Markets. Chapter 15 bankruptcy is commonly utilized for international transactions.

Simms did not seek the court to dismiss the U.S. bankruptcy proceedings, but he did ask the court to acknowledge the legitimacy of the Bahamian legal processes, which he said could “affect” the U.S. proceedings for the other FTX-controlled corporations.

FTX Digital Markets was the parent business of the whole FTX empire, and all of that empire’s assets ultimately belong to FTX Digital Markets, Simms said in his declaration.

In his declaration, Simms stated, “Despite the allegedly complex structure of the FTX Brand firms, the whole FTX Brand was ultimately operated from a single location: The Bahamas.” Similarly, all core managerial employees were located in The Bahamas.

Simms has requested provisional relief including the recognition of Bahamian bankruptcy and liquidation proceedings, and orders entrusting FTX’s U.S.-based assets to Bahamian liquidators, authorizing “urgent discovery measures,” and prohibiting any of FTX’s assets from being “transferred, encumbered, or otherwise disposed of.”

Currently, a hearing to determine next measures is scheduled for December 13.

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