Dec 14 (Reuters) – Lawyers for bankrupt crypto exchange FTX will face off in court on Wednesday to fight a request for internal records by an insolvent subsidiary based in the Bahamas as the two battle over the scraps of the once high-traffic business.
In an emergency hearing on Wednesday, the liquidators of FTX’s Bahamian business will ask US bankruptcy judge John Dorsey to grant them access to the accounts and data of the US unit of Slack, Google and Amazon Web Services.
FTX’s attorneys asked Dorsey to deny the request. They alleged that Bahamian regulators worked with FTX’s founder, the recently arrested Sam Bankman-Fried, to undermine the US bankruptcy and withdraw assets to the detriment of some creditors.
FTX, its hedge fund Alameda Research and dozens of affiliates filed for bankruptcy in the US last month after the trading platform suffered a flurry of withdrawals and a rescue deal collapsed.
That same week, authorities in the Bahamas, where the company was headquartered, appointed liquidators to wind up FTX’s international trading operations.
The dispute between FTX’s U.S. bankruptcy team and the attorneys appointed to oversee the liquidation of Bahamas-based FTX Digital Markets aired in Congress on Tuesday.
John Ray, who was named CEO of the bankrupt FTX, told a congressional committee that the Bahamian government colluded with Bankman-Fried to help account holders in the country extract $100 million from the crypto exchange just as it was going bankrupt.
Ray called the actions of the Bahamian government “alarming” and suggested that the people of the Bahamas have something to hide.
“Unlike the Chapter 11 process, there is no transparency in the process in the Bahamas,” Ray said. “Again, we asked them for clarity on what they were doing, and it blew us away.”
The Securities Commission of the Bahamas (SCB) disputed Ray’s “misstatements” about the Bahamian government’s response to the FTX collapse.
Ray’s recent court filings included partial transcripts of emails between lawyers for the US bankruptcy team and Bahamian liquidators, creating a “false impression” that Bahamian citizens were being protected at the expense of other FTX clients, SCB said in a statement.
Any improper distributions to Bahamian citizens will be subject to appropriate clawback procedures under the law, SCB wrote.
Bankman-Fried was arrested Monday in the Bahamas and is being held pending extradition to the United States to face criminal and civil fraud charges. (Reporting by Dietrich Knauth; Editing by Leslie Adler)