FTX May Have Committed Serious Fraud and Mismanagement: Bahamas Liquidators
One week after the implosion, legal woes for FTX have only intensified. According to the latest court filings from the company’s Bahamian liquidators, there are signs of “serious fraud and mismanagement” on the bankrupt crypto exchange’s part.
The document filed in the US Bankruptcy Court of the Southern District of New York revealed that the Joint Provisional Liquidators’ findings to date indicate that FTX may have committed serious fraud and mismanagement.
The filing seeks to obstruct the sale of any assets by the company provisionally until a verdict is reached by the courts under Chapter 15 of the US bankruptcy code, which deals with insolvency cases involving more than one country.
Allegations Against FTX
Troubles for FTX do not stop there. As per a Tuesday filing, the court-appointed provisional liquidator in charge of the exchange’s bankruptcy proceedings in the Bahamas, Brian Simms, has disputed the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and the collective 100-odd affiliates in Delaware court.
The Bahamas-based lawyer highlighted that FTX Digital is not part of the Delaware Petition and added that the provisional liquidator is the only one “authorized to take any action including, but not limited to, filing the Delaware Petition.”
“The Provisional Liquidation Order divests FTX Digital’s directors’ of the ability to act, or exercise any functions, for or on behalf of FTX Digital unless expressly instructed to so by me in writing.”
Simms also argued that he rejects the validity of any “purported attempt to place FTX Affiliates in bankruptcy” as he did not “authorize or approve, in writing or otherwise.” He further stressed that the FTX brand and all its core management personnel ultimately operated from the Bahamas.
The lawyer, however, does not seek the court to dismiss the bankruptcy proceedings in the US but instead has requested the courts in the country recognize the Bahamas’ legal proceedings.
Extradition, Lawsuits, and More
FTX investors have filed a lawsuit in Miami against former CEO Sam Bankman-Fried. According to reports, the lawsuit alleges that the crypto-yield-bearing accounts in question were unregistered securities illegally sold in the United States. It seeks damages worth $11 billion from several celebrities involved with promoting FTX, including Tennis Star Naomi Osaka and NFL quarterback Tom Brady.
Law-enforcement officials from both countries are currently in talks about whether SBF should be extradited to the US for questioning.
With allegations against FTX and its operators intensified, Bahamian Prime Minister Philip Davis asserted that the existing framework would not have prevented the collapse.
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I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.