As if FTX’s bankruptcy proceeding wasn’t messy enough.
On the same day FTX’s new chief executive said he had never seen such utter chaos at a bankrupt company, lawyers for the firm accused founder Sam Bankman-Fried of supporting efforts to undermine the process.
In a legal filing seeking to combine all bankruptcy proceedings to one process in federal court in Delaware, lawyers for the company said a dueling bankruptcy filed in New York by administrators in the Bahamas seeking to seize control of some assets was adding to the turmoil surrounding FTX.
FTX filed for Chapter 11 bankruptcy protection in Delaware on Friday, but four days later attorneys in the Bahamas filed a separate Chapter 15 bankruptcy petition in federal court in New York for FTX Digital Markets, Ltd., a subsidiary that managed significant aspects of the company’s operations from its headquarters in the Caribbean island nation.
A Chapter 15 filing is used typically in cases involving companies with debtors in multiple countries.
Thursday’s filing argued that comments Bankman-Fried made to a reporter the day before, in which he said his goal was to “win a jurisdictional battle with Delaware,” suggested he was pushing for Bahamian officials to at least partially take control of efforts to unwind the company.
Bankman-Fried “appears to be supporting efforts by the joint provisional liquidators to expand the scope of the FTX DM proceeding in the Bahamas, to undermine these Chapter 11 cases, and to move assets from the debtors to accounts in the Bahamas under the control of the Bahamian government,” the filing read.
The filing also said Bankman-Fried’s erratic public communications were further complicated the process.
“In terms of the celebrity of Mr. Bankman-Fried, his unconventional leadership style, his incessant and disruptive tweeting since the petition date, and the almost complete lack of dependable corporate records, these Chapter 11 cases are unprecedented,” the filing read.
Bankman-Fried didn’t immediately respond to a message seeking comment.
The court filing said administrators of the Delaware case had been in touch with lawyers in the Bahamas in an attempt to coordinate efforts, but were caught off guard by the filing of the second bankruptcy case in New York.
“The filing of the Chapter 15 Case without advance notice and in the [southern district of New York] is a blatant attempt to avoid the supervision of this court and to keep FTX Digital Markets isolated from the administration of the rest of the debtors,” the filing read.
The filing also said the company’s bankruptcy administrators had “credible evidence” that officials in the Bahamas had attempted to access FTX’s systems after the Chapter 11 filing, “for the purpose of obtaining digital assets of the debtors.”
A message left with Brian Simms, the Bahamian lawyer who filed the second bankruptcy case, wasn’t immediately returned.
In a filing in the New York bankruptcy on Wednesday, Simms argued that he and his team needed access to FTX Digital’s accounts and records in order to take stock of the company’s assets and to prevent them from being improperly transferred.
“At this juncture, the full scope and location of FTX Digital’s assets, claims and liabilities are unknown. Accordingly, it is critical that the court enter an order preventing creditors from executing on FTX Digital’s assets,” he wrote.
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