Control of FTX’s bankruptcy proceedings took a chaotic twist as the Bahamas Securities Commission challenged the exchange’s chief executive decision and authority in the chapter 11 filing. 

Brian Simms acting as provisional liquidator through a court directive to oversee FTX Digital Markets proceedings questioned the November 14 decision undertaken by FTX Trading alongside 134 FTX-controlled entities to initiate Chapter 11 filing in the Delaware Court. Acting as the debtor’s foreign representative, Simms initiated a Chapter 15 filing seeking the US bankruptcy court to recognize the insolvency proceedings in the Bahamas. The submission acknowledged that Chapter 15 proceedings justified the relief sought from the Delaware court as the case involved FTX as a foreign company engulfed in cross-border bankruptcy. 

Bahamian Liquidator Seeks Control 

Simms sought control over the FTX bankruptcy proceedings by declaring court-granted authority to act and file the Delaware petition. Simms indicated that the provisional liquidation order granted in the Bahamas extinguished the capability of FTX digital’s chief executive and directors to either represent or exercise functions for the Group unless through written instructions by the liquidator. 

The Bahamas-trained lawyer ruled out authorizing or approving the Chapter 11 filing utilized when a business seeks debt reorganization and repayment as it operates. He dismissed the attempt to place FTX Trading and affiliates in bankruptcy as invalid. 

FTX Complex Corporate Structure

Simms’ submission emphasized that the FTX brand had the Bahamas as the single operation center for the entire Group. He noted the core management personnel had been domiciled in the Bahamian capital – Nassau, since 2021, when China’s crypto ban forced Sam Bankman-Fried (SBF) to relocate FTX from Hong Kong. 

Although invalidating the Chapter 11 filing, Simms failed to seek dismissal of the present proceedings. Instead, Skimms pleaded with the court sitting in the Southern District of New York court to acknowledge legal actions initiated in the Bahamas. Nevertheless, he noted the relief sought in the Chapter 15 filing would have a conceivable influence on the Chapter 11 filing made by FTX affiliates.

Brewing Dispute over Filing Validity

Simms pleadings portray a fight over the control of FTX’s bankruptcy. Simms indicated that the provisional liquidators were appointed following the November 10 decision by the Bahamian securities regulator to suspend the FTX license and freeze assets controlled or owned by the local subsidiaries. 

Simms’ pronouncement during the Chapter 15 filing signals the brewing dispute over the party to lead the bankruptcy. Alternatively, the statements may appear to ensure Delaware bankruptcy proceedings do not override Bahamas liquidators’ efforts. 

Besides, citing FTX corporate structure is headquartered in could imply the Bahamas liquidators have the sole power of placing the hundreds of FTX-controlled entities into bankruptcy. Complexity in the FTX saga is unfolding in the argument that FTX.com operated in the Bahamas as a separate entity from the US. It remains to be seen if FTX Digital Markets owns property in Delaware since the line supposedly separating it from other affiliates, including Alameda Research, seems blurred.

However, the $15000 held by Holland and Knight law firm on behalf of the client account reveals a link. Simms declaration recognizes the seemingly complex structure to plead for US court facilitation for urgent discovery measures and prevent the transfer, encumbering, and disposal of FTX assets. 

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