FTX’s US Judge Vows to Keep Control of Crypto in Blow to Bahamas

Steven Church, Bloomberg News

The FTX Cryptocurrency Derivatives Exchange logo on a laptop screen arranged in Riga, Latvia, Nov. 24, 2022. The implosion of Sam Bankman-Fried’s FTX empire dealt a harsh blow to the Bahamas’ ambitions to be a hub for the crypto industry, and it’s causing massive pain for locals who treated the now-bankrupt exchange like a bank. Photographer: Andrey Rudakov/Bloomberg , Bloomberg

(Bloomberg) -- The federal judge overseeing the bankrupt crypto firm FTX vowed to retain control over $7.3 billion in disputed assets, a potential setback for liquidators in the Bahamas seeking to claim to some of the money as part of a separate insolvency case on the island nation.

US Bankruptcy Judge John Dorsey sided with the restructuring advisers who took over FTX from its co-founder Sam Bankman-Fried, who faces federal fraud charges. A central question in the US bankruptcy is who has a claim on billions of dollars in cash and crypto coins, Dorsey said.

“Under no circumstances would I ever defer a core” issue in the bankruptcy case to a foreign court, Dorsey said. “Only I have access to the assets.”

A liquidator in the Bahamas has asked Dorsey for permission to bring certain legal issues before a Bahamian judge who is overseeing the insolvency case of one small unit of the FTX empire. Advisers to FTX claim that is a back-door attempt to grab assets in the US and move the reorganization out of a federal court in Wilmington, Delaware.

Dorsey said he would make a final ruling on the liquidator’s request on June 9, when the company returns to court.

Liquidators for the Bahamas division — which is known as FTX Digital Markets — have argued that the unit owns FTX.com’s property, the company said in court papers.

The case is FTX Trading Ltd., 22-11068, US. Bankruptcy Court for the District of Delaware.