FTX's US bankruptcy filing has been deemed invalid by the Bahamas' liquidators
November 17, 2022 11:32 AM
There was no legal basis for FTX to declare for bankruptcy in the United States, according to the interim liquidator monitoring the case.
Provisional liquidator Brian Simms, appointed by the court in the Bahamas to monitor the bankruptcy proceedings, has questioned the legality of a Chapter 11 bankruptcy file made by FTX Trading and 134 other affiliates in a Delaware court on November 14.
On November 15th, Simms submitted paperwork to the United States Bankruptcy Court for the Southern District of New York, requesting recognition of an ongoing international insolvency case in the United States through Chapter 15 Bankruptcy.
In the document, Simms says he is the only one "allowed to conduct any act including, but not limited to, filing the Delaware Petition" and that FTX Digital is not a part of the Delaware Petition.
Without my written authorization, the directors of FTX Digital are no longer able to act on behalf of or perform any duties on behalf of FTX Digital as a result of the Provisional Liquidation Order.
The attorney from the Bahamas claims he does not recognize the "validity of any putative attempt to place FTX Affiliates in bankruptcy" since he "did not authorize or approve, in writing or otherwise."
He goes on to say, "In the end, the entire FTX Brand was run out of the Bahamas." The same could be said of the company's top management, all of whom were based in the Bahamas.
Sam Bankman-Fried (SBF) established the FTX digital asset exchange in Hong Kong in May 2019, but in September 2021, following China's crypto prohibition, SBF moved the company to Nassau, the capital of the Bahamas.
Although "no temporary order seeking the injunction or dismissal of the Chapter 11 is presently sought," Simms has urged that the U.S. courts recognize the legal procedures taking place in the Bahamas.
The filing also mention that "it is conceivable that the FTX Affiliates that filed Chapter 11 will be impacted by the provisional remedy requested."
A company can keep operating while reorganizing its obligations and repaying its creditors under Chapter 11.
The Bahamian securities authority suspended FTX's registration status and froze its local subsidiary's assets on November 10, prompting the appointment of provisional liquidators.