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FTX Trading has announced a settlement with the liquidators of its Bahamian unit, FTX Digital Markets. This pivotal agreement aims to resolve the contentious dispute over the precedence of US bankruptcy proceedings versus the Bahamian liquidation process. The settlement, which requires approval from the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of the Bahamas, heralds a new era of collaboration in handling complex crypto insolvency cases.
Under the terms of the agreement, FTX and FTX Digital Markets will pool their assets and align their strategies for valuing customer claims. This coordinated effort ensures equitable treatment for customers involved in either country’s insolvency proceedings.
Crucially, most customers of FTX.com’s international crypto exchange will now have the option to seek repayment from either the US bankruptcy proceedings or the Bahamian liquidation. This flexibility is significant in addressing customer concerns and streamlining the claims process.
FTX Digital Markets is also set to align its know-your-customer (KYC) procedures with those of the U.S., the Bahamas, and other relevant jurisdictions. This move underscores a commitment to adhering to diverse legal standards and maintaining regulatory compliance during bankruptcy proceedings.
Liquidation of Bahamian Real Estate
A key aspect of this agreement is the liquidation of FTX’s real estate holdings in the Bahamas, led by FTX Digital Markets. This strategy forms an integral part of the broader asset management plan, aimed at maximizing returns from these holdings to benefit stakeholders.
John J. Ray III, CEO and chief restructuring officer of FTX, acknowledges the challenges in resolving the conflicts between the filings of FTX debtors and FTX Digital Markets. He views this agreement as a critical milestone in navigating these complexities.
Brian Simms and Peter Greaves, the Bahamian liquidators, emphasize that the agreement will circumvent years of protracted litigation, expedite the return of funds to customers, and simplify the overall process.
Implications for Equity Holders
The agreement clearly states that interests against FTX debtors and FTX Digital Markets held by FTT will be treated as equity. Consequently, these holdings will not be eligible for recovery, delineating clear boundaries for equity stakeholders in this intricate bankruptcy case.