On Tuesday, the financially distressed cryptocurrency exchange, FTX Trading, disclosed an agreement with liquidators for FTX’s Bahamas unit, bringing resolution to a prolonged disagreement regarding the priority of the company’s U.S. bankruptcy proceedings over the liquidation process in the Bahamas.
FTX and FTX Digital Markets both consented to consolidate their assets and standardize their method of assessing customer claims, ensuring equitable treatment for customers involved in the insolvency proceedings of either country. As per FTX, this settlement will empower the majority of customers on FTX.com’s global cryptocurrency exchange to decide whether to pursue repayment through the U.S. bankruptcy process or the liquidation proceedings in the Bahamas.
FTX’s CEO, John Ray, who assumed leadership of the company following the conviction of FTX founder Sam Bankman-Fried, emphasized that the agreement marks a crucial milestone in the company’s endeavors to reimburse its customers. Ray said in a statement:
The unique challenges raised by the conflicting filings of the FTX Debtors and FTX Digital Markets have been some of the toughest the team has faced […] But we recognized at the beginning that we have an overlapping constituency: FTX.com customers.
In a statement, the Bahamian liquidators, Brian Simms and Peter Greaves, noted that the agreement will prevent “years of protracted litigation and expense” and “accelerate the return of funds to customers.”
Since filing for bankruptcy protection on November 11, FTX has been in conflict with Bahamian authorities, revealing a gap in its balance sheet that exposed its 9 million customers to potential losses in the billions. In March, FTX initiated legal action against the Bahamian liquidators, seeking a judgment that the liquidators had inaccurately asserted ownership of the exchange’s assets.
As per the arrangement, FTX’s U.S.-based bankruptcy team will spearhead efforts in asset recovery, including any potential sale of the FTX.com exchange or its intellectual property. Meanwhile, the Bahamian liquidators will be responsible for divesting real estate assets in the Bahamas and pursuing specific litigation claims.
Furthermore, the settlement incorporates an agreement involving FTX’s proprietary crypto token, FTT, being treated as equity in FTX. This equity would be nullified in the event of the company’s bankruptcy. The valuation of FTT tokens had been a source of disagreement between the two parties last year, with FTX’s U.S. team contending that the majority of assets seized by the Bahamian liquidators consisted of worthless FTT tokens.
Having experienced a collapse in November 2022, FTX has pledged to allocate a minimum of 90% of its assets towards compensating customers. The company intends to reimburse customers in U.S. dollars rather than in cryptocurrency.