According to The Court-Appointed Bahamas Liquidators, FTX Is Speculated to Have Committed Serious Fraud and Mismanagement.


The legal woes for FTX have intensified a week after the implosion rather than reduced. Based on the recent court filings from the company’s Bahamian liquidators, there are indications of “serious fraud and mismanagement” on the bankrupt crypto exchange’s part.

The document filed in the US Bankruptcy Court of the Southern District of New York showed that the Joint Provisional Liquidators’ findings to date indicate that FTX may have committed serious fraud and mismanagement.

The filing seeks to obstruct the sale of any assets by the company provisionally until the courts reach a verdict under Chapter 15 of the US bankruptcy code, which deals with insolvency cases involving more than one country.

Brian Simms, the court-appointed provisional liquidator, overseeing the exchange’s bankruptcy proceedings in the Bahamas, has argued the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and the collective 100-odd affiliates in Delaware court. The court-appointed liquidators are eyeing to halt FTX’s asset sales.

The Bahamas-based lawyer highlighted that FTX Digital is not part of the Delaware Petition and added that the provisional liquidator is the only one “authorized to take any action including, but not limited to, filing the Delaware Petition.”

 “The Provisional Liquidation Order divests FTX Digital’s directors’ of the ability to act, or exercise any functions, for or on behalf of FTX Digital unless expressly instructed to so by me in writing.”

Simms also contended that he rejects the validity of any “purported attempt to place FTX Affiliates in bankruptcy” as he did not “authorize or approve, in writing or otherwise.” He stressed that the FTX brand and all its core management personnel ultimately operated from the Bahamas.

The lawyer, however, does not seek the court to dismiss the bankruptcy proceedings in the US but instead has requested the courts in the country recognize the Bahamas’ legal proceedings.

FTX investors have filed a lawsuit in Miami against former CEO Sam Bankman-Fried. According to reports, the lawsuit alleges that the crypto-yield-bearing accounts in question were unregistered securities illegally sold in the United States. It seeks damages worth $11 billion from several celebrities involved with promoting FTX, including Tennis Star Naomi Osaka and NFL quarterback Tom Brady.

Law-enforcement officials from both countries are discussing whether SBF should be extradited to the US for questioning.

With allegations against FTX and its operators intensified, Bahamian Prime Minister Philip Davis asserted that the existing framework would not have prevented the collapse.

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