FTX bankruptcy attorneys say they “don’t trust” the Bahamas government.

DEC 14 (Reuters) – Lawyers for bankrupt crypto exchange FTX on Wednesday defied a request for internal records from a bankrupt Bahamas-based subsidiary, saying they do not “trust” the Bahamian government with data needed to siphon off assets could be used by the bankrupt company.

The liquidators of FTX’s Bahamian business, FTX Digital Markets, had asked US bankruptcy judge John Dorsey to grant them access to the accounts and data of US unit Slack, Google and Amazon Web Services.

At a Delaware court hearing, attorneys for FTX urged Dorsey to deny the motion. They argued that Bahamian regulators worked with FTX founder, recently arrested Sam Bankman-Fried, to undermine the US bankruptcy case and siphon assets to the detriment of some creditors.

FTX attorney James Bromley told Dorsey that the Bahamian government previously received information from the liquidators of FTX Digital Market and used it to siphon off FTX digital assets.

“This is dangerous information,” Bromley said. “We don’t trust the Bahamian government.”

The Securities Commission of the Bahamas (SCB) has previously denied FTX’s “misstatements” about the Bahamian government’s response to FTX’s collapse.

Asked for comment on Wednesday, SCB said it was “not providing responses to general inquiries at this time”.

The Prime Minister of the Bahamas, Philip Davis, defended the country’s regulation of the digital asset industry in an interview with local broadcaster Eyewitness News on Wednesday.

“It’s amazing that you could say it’s an improperly regulated industry,” he said when asked about his response to criticism of the country’s handling of the FTX collapse.

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Chris Shore, an attorney for the Bahamas-based liquidators, told Dorsey that the liquidators were not working under the direction of the Bahamian government. The liquidators are court-appointed officers working to protect FTX Digital’s creditors and need access to data to do that work, Shore said.

Dorsey began the hearing by asking if FTX and the Bahamas liquidators could reach a compromise over data sharing, before Bromley dismissed that proposal.

Bromley said Bankman-Fried’s recent arrest could help negotiations between FTX and Bahamian authorities, but he remains cautious.

Dorsey suggested the two sides either find a mediator or prepare to present evidence at a court hearing in January.

‘WRONG IMPRESSION’

FTX, its hedge fund Alameda Research and dozens of subsidiaries filed for US bankruptcy last month after the trading platform suffered an onslaught of withdrawals and a failed bailout deal.

That same week, authorities in the Bahamas, where the company was headquartered, appointed bankruptcy trustees to handle FTX’s international trading business.

John Ray, who was appointed chief executive of bankrupt FTX, told a congressional committee on Tuesday that the Bahamian government had worked with Bankman-Fried to help account holders in the country withdraw $100 million from the crypto exchange, just as she went bankrupt.

Ray described the Bahamian government’s actions as “alarming”.

“Unlike the Chapter 11 trial, there is no transparency in the Bahamas trial,” Ray said. “We repeatedly asked them for clarification on what they were doing and we were shot down on that.”

The SCB said in court filings Tuesday that Ray “created a false impression” that Bahamian citizens would be protected at the expense of FTX’s other customers. It urged him not to “obstruct” his investigation into FTX’s collapse.

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Bankman-Fried was arrested in the Bahamas Monday and is being held while awaiting extradition to the United States to face criminal and civil fraud charges.

Reporting by Dietrich Knauth; Edited by Alexia Garamfalvi, Deepa Babington and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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