Home > NEWS > FTX debtors file lawsuit against exchange’s Bahamian arm on ownership of property

FTX debtors file lawsuit against exchange’s Bahamian arm on ownership of property

The lawsuit claims FTX Digital Markets was an “economic nullity” within the FTX Group “created as a front to facilitate a conspiracy to defraud the Debtors’ customers.”

The legal team representing Alameda Research, FTX US and FTX Trading has filed a lawsuit against Bahamas-based FTX Digital Markets, claiming that the company is a "fraudulent enterprise" used as a shell entity to confuse the ownership of the company.

In a filing with the United States bankruptcy Court for the District of Delaware on March 19, the FTX debtor stated that FTX Digital Markets (FTX DM) and the Joint interim Liquidator (JPL) claimed that the Bahamas branch was the "presumptive owner" of FTX.com 's legal and encrypted assets and other intellectual property rights. According to the complaint, as FTX DM continues bankruptcy proceedings in the United States, these "unfounded claims" by FTX DM "will harm FTX.com customers and all other creditors of FTX Debtors".

"JPMorgan's claim to the FTX.com property is based primarily on constructive, equitable and other unwritten arguments based on the false premise that FTX DM is the centre of the FTX group," the document said. "this is very different from the truth," he said. FTX DM is only a temporary provider of limited 'matchmaking' services for customers on cryptocurrency exchanges established, owned and operated by FTX Trading, its direct parent company. "

The indictment says:

FTX DM is an economic waste within the FTX Group. FTX DM is also legal and invalid. FTX DM's unique history is a classic example of misuse of the corporate form. It is a front to facilitate customers who conspire to defraud debtors.

As part of the documents submitted to the court, the debtor sought a decision that would assert that FTX DM had a "title interest" in the property at the centre of the bankruptcy case. In addition, the legal team cited criminal and civil charges against Sam Bankman-fried, former CEO of FTX, in the United States, claiming that he had contact with the Bahamian authorities with the aim of minimizing his criminal and civil risks if large-scale fraud was found.

FTX filed for bankruptcy in the United States on November 11, a day after the Bahamas Securities Commission froze FTX DM's assets and suspended the company's registration. The country's Supreme Court later approved the appointment of Kevin Cambridge and Peter Greaves of PricewaterhouseCoopers as provisional liquidators in the FTX DM case.

Bankman-Fry has pleaded not guilty to criminal charges in the United States, while civil cases filed by federal financial regulators have been postponed until after the SBF trial in October. The former FTX chief executive is now free after paying $250 million bail, but he often appears in court to reopen the issue after being found using encrypted messaging applications and virtual private networks.

by Turner Wright
© 2023 WJB All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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