The Bahamian affiliate was a "corporate shell" and the "centerpiece" of founder Sam Bankman-Fried's effort "to funnel FTX Trading customer deposits and other valuable property and rights to the Bahamas, out of the reach of American regulators and courts," according to the lawsuit. FTX Digital Markets' liquidators recently asked the Bahamas Supreme Court to rule on which FTX entity is responsible for re-paying customers and should control its assets, arguing that the Bahamian company took on a more central role for FTX.com as the company moved to the Bahamas from its previous headquarters in Hong Kong.
FTX's business plan and a May 2022 change in FTX.com's terms of service made clear that FTX "intended to migrate existing international customers to FTX Digital," the liquidators said in a February filing in the Bahamas court.
FTX disputed that in Sunday's filing, saying that FTX Digital Markets never performed any significant services for the exchange business, and that the "secret" change in FTX.com's terms of service did not transfer any property or responsibility to FTX Digital Markets. The Bahamas-based liquidators declined to comment. FTX declined to comment. Bankman-Fried did not immediately respond to a request for comment.
FTX has been at odds with Bahamian officials ever since filing for bankruptcy protection on Nov. 11, with a hole in its balance sheet that left its 9 million customers facing billions in potential losses.
The Securities Commission of the Bahamas began liquidation proceedings against FTX Digital Markets a day before the U.S. bankruptcy filing of FTX Trading and more than 100 affiliates, and the two sides have sparred over ownership of FTX assets and access to company data.
FTX and the Bahamian liquidators had sought to cool down the simmering dispute in January, reaching an agreement to cooperate on asset recovery efforts. FTX Digital Markets said in recent court filings in the Bahamas that the cooperation agreement does not prevent it from seeking a ruling on which FTX entity controlled the exchange. Bankman-Fried has been arrested on fraud charges, and several FTX insiders have pleaded guilty to criminal charges. Bankman-Fried has denied wrongdoing and is expected to face trial in October. FTX reported this month that Bankman-Fried took $2.2 billion from the company during a period when the crypto exchange lost $8 billion of customer money. (Reporting by Dietrich Knauth in New York Editing by Alexia Garamfalvi and Matthew Lewis)
