March 2024 | By

JOLs obtain Sanction of The Bahamas Supreme Court to enter into Global Settlement Agreement with Chapter 11 Debtors to pool assets of FTX Digital’s Estate

1. The Joint Official Liquidators of FTX Digital Markets Ltd. (Brian Simms KC, Peter Greaves and Kevin Cambridge) (“the JOLS”) have entered into a Global Settlement Agreement (“GSA”) with the Chapter 11 Debtors of the FTX Companies ( approximately 130 FTX Companies which filed for Chapter 11 on 11th November 2022).

2. FTX Digital Markets Ltd. (“FTX Digital”) is a Bahamas Company regulated under the Digital Assets Registered Exchanges Act (“DARE Act”) which did not file for Chapter 11 but rather, FTX DIgital was put into provisional liquidation one day before the Chapter 11 filings on 10th November 2022.

3. FTX Digital was put into provisional liquidation on the basis of a regulators petition presented by the Securities Commission of The Bahamas (“SCB”) on the basis that FTX Digital was in breach of their duty to act honestly and fairly, to act with due care and diligence, observe and maintain a high standard of professional conduct and maintain financial resources and solvency as required by the DARE Act.

4. The SCB believed the action to be necessary to protect the interests of clients or creditors; and due to FTX Digital’s breach of the DARE Act and non-compliance with its duties. The appointment of provisional liquidators was necessary to prevent dissipation or misuse of the company’s assets; and/or to prevent mismanagement or misconduct on the part of the company’s directors; and/or in the public interests.

5. Hostile litigation ensued in the US Bankruptcy Court with respect to ownership of assets of FTX Digital’s Estate and attempts to seek to reconcile customers of FTX Digital’s Estate resulted in increasingly tense litigation with the Chapter 11 Debtors. Approximately $143 million of FTX Digital’s funds were also frozen by the US Department of Justice and FTX Digital was unable to realize approximately $256 million worth of property located in The Bahamas which FTX Digital claimed that it owned but which the Chapter 11 Debtors disputed.

6. FTX Digital was placed into Official Liquidation on 10th November 2023. The execution of the GSA results in settlement of all litigation and pooling of assets of the Chapter 11 Debtors with FTX Digital Markets Ltd. The JOLs will now be able to realize property in The Bahamas.

7. Following an application seeking sanction of the Court with respect to various powers exercisable under the Fourth Schedule of the Bahamas Companies Act as amended, the JOLs obtained the Court’s blessing in relation to entry into the GSA which has the effect of departing from the pari passu rule. The GSA also results in the novel approach of pooling of assets of dual insolvency proceedings, and presenting opportunities for creditors and customers to be paid based largely on valuations initially determined by US Scheduled claims which customers will have the right to submit claims for either in the United States or The Bahamas.

  • In an ex tempore ruling handed down by Justice Klein on 22nd January 2024 His Lordship the Honorable Justice Loren Klein His Lordship held at [8] that “the GSA and the ancillary agreements and arrangements necessary to support it, represent a practical modus operandi for proceeding with the liquidation by the JOLs, and will be in the commercial best interests of the company, and the creditors and customers of FTX DM. And I say that in regard to the novel and complex legal issues raised by this liquidation. In this regard, I have in mind the adversarial proceedings between FTX DM and the US Debtors which are being compromised as a result of the GSA, the multiple cross-border issues, and the concurrent proceedings here and in the bankruptcy courts of Delaware. [9] I also have in mind what has been described [by counsel] as the “inextricably co-mingled assets”— in the BBCI case (Re Bank of Credit and Commercial International SA (In Liquidation) (No. 3) [1993] BCLC 1490) it was described as a “hopeless intertwining” of assets—because I think this is important for supporting the approach for the pooling of assets for distribution. Further, I think the evidence clearly supports the conclusion that the JOLs have done everything within their power to strike the best possible deal for the stakeholders in question, and one which is not at all unreasonable in the circumstances.”

A copy of the Ex Tempore judgment can be viewed here.


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