(Bloomberg) — Bahamian regulators and court officials met this week with the US restructuring team in control of the failed crypto firm FTX in an attempt to resolve part of an unusual legal standoff that has embroiled the company’s bankruptcy case.
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Liquidators appointed by a court in the Bahamas are willing to drop their demand for immediate, online access to FTX systems, as long as they can get certain data stored on the computers, said a US lawyer describing the meeting in court on Friday. American lawyers for FTX have rebuffed Bahamas officials, saying government regulators can’t be trusted with “live” access to the company’s computers.
The issue is one of two legal fights pending in federal court in Wilmington, Delaware, where about 100 FTX units have filed Chapter 11 cases in order to collect as many missing assets as possible to pay creditors owed billions of dollars. The Bahamian liquidators also want US Bankruptcy Judge John Dorsey to recognize the case they filed in the islands’ Supreme Court as the primary restructuring effort. FTX lawyers are fighting that request.
The two sides said they hope to resolve both issues as they continue negotiating.
The computer access feud “is really interfering with the liquidators’ ability to do their job,” Jason Zakia, a lawyer for the liquidators said during a video court hearing Friday morning. Bahamian liquidators argue they’re entitled to access to the computer network so they can clean up a locally based subsidiary.
The liquidators will accept “static” access to the data for now, Zakia said. In an earlier hearing, FTX lawyer James Bromley had said FTX would only give the Bahamas limited access to information stored on company servers.
Should the two sides fail to cut a deal on data access, Dorsey is scheduled to hold a mini-trial on Jan. 6. The FTX team said it would put on evidence showing that the Bahamas have colluded with FTX founder Sam Bankman-Fried, a charge the Bahamas lawyers deny. Bankman-Fried is under arrest in the Bahamas and faces fraud charges in the US.
The liquidators control a single FTX entity, called FTX Digital, which is being supervised by a court in the Bahamas. The American team controls nearly all the rest of Bankman-Fried’s former empire, which filed for court protection from creditors on Nov. 11. That means most of the assets, wherever they are located, are likely under the authority of Dorsey.
In a court filing Monday, the liquidators demanded that a property-owning unit be dismissed from bankruptcy in Delaware and sold for parts in the Bahamas.
Among other things, they say the real estate should be liquidated in the Bahamas because the unit that owns it has no connection to the US — not even a bank account. They also claim that two signatures were required to put property-holding unit into bankruptcy in the US., but that only Bankman-Fried authorized the filing, so it is illegal.
The case is FTX Trading Ltd., 22-11068, US. Bankruptcy Court for the District of Delaware.
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