Received FTX Debt Claim Letter? Bahamas Court Explains Differences and Impact on U.S. Claims Process

On 3/2, many FTX users received a debt claim email from FTX Digital Markets Ltd., the Bahamas entity of FTX. The sender is [email protected]. Some may suspect it is a scam or be confused, thinking, "Hasn't FTX already been reorganized under John Ray's bankruptcy?" However, don't worry, this is a liquidation case being executed by the Bahamian court and the liquidator of FTX in that jurisdiction, which is separate from the reorganization case led by John Ray in the U.S.

Why is the Bahamas also involved in FTX claims?

Due to the presence of different entities of the FTX Group worldwide, various legal jurisdictions have the right to bring claims against FTX. The difference lies in the amount of assets that each jurisdiction can actually control in relation to the "FTX Group," which determines the influence on creditors.

Although FTX Group has appointed John Ray as the CEO to handle the liquidation and restructuring tasks, thereby gaining control of most FTX assets, the Bahamian government seized some assets at FTX's headquarters at the time, and FTX also holds multiple properties in the Bahamas, giving the Bahamian court some influence.

While the FTX restructuring case in the US claims that FTX assets globally should be coordinated for distribution by the US case, each legal jurisdiction may not necessarily comply.

Fortunately, in January 2023, the Supreme Court of the Bahamas approved that the Bahamian provisional liquidator could share information with US debt representatives, and both parties issued a joint statement to cooperate in handling Bahamian assets, including real estate and custodial assets. The Bahamas and the US reached a cooperation agreement: resolution of real estate issues, New York court provides contact channels for victims

Subsequently, both parties reached a cooperation agreement to consolidate assets and liabilities, providing debtors with the same claim content.

For more information on the Bahamas claims portal, please visit: More avenues for claims, pending applications can be completed through FTX Digital by May 15

The email from FTX Digital Markets Ltd. also explains:

How is FTX Digital liquidation different from FTX Chapter 11 bankruptcy? Why are there separate bankruptcy and liquidation procedures?

FTX Group conducts transactions with over a hundred entities globally. FTX Digital liquidation is a court-ordered process for the orderly liquidation of FTX Digital's business and legal entities in the Bahamas. In addition to FTX Digital's liquidation and the US Chapter 11 bankruptcy process, there are separate liquidation processes for FTX Australia, FTX Japan, FTX Turkey, and FTX EU, where regulatory authorities in each region represent customers and creditors to complete the liquidation of the FTX Group.

Can customers apply for FTX liquidation procedures in all countries?

The Bahamian court explains that users can file claims in multiple procedures, however, creditors can only receive distributions from one of the procedures, and clients need to agree on a procedure to choose the one they want to follow.

FTX.com customers who have already or will file claims in the US and Bahamian procedures will be able to formally choose one before the May 15, 2024, claims deadline. Customers who have submitted claims in the US but want to file claims in the Bahamian procedure must actively choose to join the Bahamian procedure through one of the following methods: submitting a proof of debt in the FTX Digital liquidation, or selecting the appropriate option during the voting process for the upcoming Chapter 11 procedure in the US to opt into the Bahamian procedure.

Should one choose the US or the Bahamas? Will the results be the same?

The Bahamian court explains that if any clients disagree with the amounts listed in the US Chapter 11 debtor's debt list and have not submitted proof of debt in the US procedure by the applicable deadline, it may now be too late. The claims deadline for the Bahamian procedure is May 15, 2024, and any clients or non-client creditors who wish to submit proof of debt can still choose to do so by that date or earlier.

The Bahamian court states that if clients are entitled to a distribution, they will receive approximately the same return regardless of which procedure they file a claim through.

For more information on this Bahamian claims case, please refer to the https://www.pwc.com/FTX PwC website.