FTX Bankruptcy: Legal Battle Over Data Access

FTX Legal Dispute Over Data Access

FTX, a bankrupt crypto exchange, is embroiled in a legal tussle over data access with its Bahamian affiliate, FTX Digital Markets. Lawyers for FTX are resisting a request from Bahamian liquidators for access to internal records, including accounts from Slack, Google, and Amazon Web Services. The core of their argument is a lack of trust in the Bahamian government's handling of sensitive information, which they claim could be misused to divert assets away from the company's creditors.

Concerns Over Bahamian Government's Role

FTX attorneys believe that Bahamian regulators have previously collaborated with FTX's founder, Sam Bankman-Fried, to undermine the U.S. bankruptcy process. They allege that this cooperation has allowed the withdrawal of assets, disadvantaging certain creditors. The Bahamian Securities Commission has contested these claims, maintaining that their actions have been misrepresented.

Government and Liquidators' Defense

Bahamas Prime Minister Philip Davis has defended the nation's regulatory framework for digital assets, rejecting criticisms of its handling of the FTX collapse. Additionally, Chris Shore, representing the Bahamian liquidators, emphasized that they operate independently of the government and require data access to safeguard creditors' interests.

Mediation and Future Proceedings

During a court hearing, Judge John Dorsey encouraged both parties to negotiate a compromise on data sharing, though FTX's counsel remains skeptical. The judge suggested mediation or a detailed court hearing slated for January if no agreement is reached.

FTX's Broader Bankruptcy Context

FTX, alongside its affiliates, filed for bankruptcy following a surge of withdrawals and a failed rescue attempt. Concurrently, the Bahamian authorities appointed liquidators to manage FTX's international operations. John Ray, FTX's CEO in bankruptcy, has accused the Bahamian government of aiding Bankman-Fried in facilitating fund withdrawals worth $100 million, an action he finds troubling due to a lack of transparency.

The Bahamian Securities Commission has criticized Ray for allegedly creating a misleading narrative that prioritizes Bahamian citizens over other FTX customers. Bankman-Fried's recent arrest in the Bahamas adds another layer to this complex legal scenario as he awaits extradition to the U.S. to face fraud charges.